EXHIBIT 10.2


 


SENIOR TERM CREDIT
AGREEMENT


 


DATED AS OF MAY 21, 2004


 


AMONG


 


CLAYTON WILLIAMS ENERGY,
INC.,

AND 

CWEI-SWR, INC.


 


AS BORROWERS


 


WARRIOR GAS CO., CWEI
ACQUISITIONS, INC.

ROMERE PASS ACQUISITION L.L.C.,

AND

CWEI ROMERE PASS ACQUISITION CORP.


 


AS GUARANTORS


 


THE LENDERS,


 


BANK ONE, NA,


 


AS THE ADMINISTRATIVE
AGENT


 


UNION BANK OF CALIFORNIA,
N.A.,


 


AS THE SYNDICATION AGENT


 


BANK OF SCOTLAND,


 


AS THE CO-AGENT


 


AND


 


BANC ONE CAPITAL MARKETS,
INC.,

AS LEAD ARRANGER AND SOLE BOOK RUNNER


 

















 


	
  ARTICLE I

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  THE CREDITS

  	
   

  
	
   

  	
  2.1.

  	
  Commitment

  	
   

  
	
   

  	
  2.2.

  	
  Required Payments; Termination

  	
   

  
	
   

  	
  2.3.

  	
  Ratable Loans

  	
   

  
	
   

  	
  2.4.

  	
  Types of Advances

  	
   

  
	
   

  	
  2.5.

  	
  Minimum Amount of Each Advance

  	
   

  
	
   

  	
  2.6.

  	
  Prepayments.

  	
   

  
	
   

  	
  2.7.

  	
  Method of Selecting Interest Periods for
  Advances

  	
   

  
	
   

  	
  2.8.

  	
  Continuation of Outstanding Advances

  	
   

  
	
   

  	
  2.9.

  	
  Changes in Interest Rate, etc

  	
   

  
	
   

  	
  2.10.

  	
  Rates Applicable After Default

  	
   

  
	
   

  	
  2.11.

  	
  Method of Payment

  	
   

  
	
   

  	
  2.12.

  	
  Noteless Agreement; Evidence of
  Indebtedness

  	
   

  
	
   

  	
  2.13.

  	
  Telephonic Notices

  	
   

  
	
   

  	
  2.14.

  	
  Interest Payment Dates; Interest and Fee
  Basis

  	
   

  
	
   

  	
  2.15.

  	
  Notification of Advances, Interest Rates,
  Prepayments and Commitment Reductions

  	
   

  
	
   

  	
  2.16.

  	
  Lending Installations

  	
   

  
	
   

  	
  2.17.

  	
  Non-Receipt of Funds by the Administrative
  Agent

  	
   

  
	
   

  	
  2.18.

  	
  Joint and Several Liability

  	
   

  
	
   

  	
  2.19.

  	
  Borrower Representative

  	
   

  
	
   

  	
  2.20.

  	
  Replacement of Lender

  	
   

  
	
   

  	
  2.21.

  	
  Limitation of Interest

  	
   

  
	
   

  	
  2.22.

  	
  Subordination of Other Obligations of the
  Credit Parties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  YIELD PROTECTION; TAXES

  	
   

  
	
   

  	
  3.1.

  	
  Yield Protection

  	
   

  
	
   

  	
  3.2.

  	
  Changes in Capital Adequacy Regulations

  	
   

  
	
   

  	
  3.3.

  	
  Availability of Types of Advances

  	
   

  
	
   

  	
  3.4.

  	
  Funding Indemnification

  	
   

  
	
   

  	
  3.5.

  	
  Taxes

  	
   

  
	
   

  	
  3.6.

  	
  Lender Statements; Survival of Indemnity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  CONDITIONS PRECEDENT

  	
   

  
	
   

  	
  4.1.

  	
  Initial Advance

  	
   

  
	
   

  	
  4.2.

  	
  Certificate of Effectiveness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
  5.1.

  	
  Existence and Standing

  	
   

  
	
   

  	
  5.2.

  	
  Authorization and Validity

  	
   

  
	
   

  	
  5.3.

  	
  No Conflict; Government Consent

  	
   

  
	
   

  	
  5.4.

  	
  Financial Statements

  	
   

  
	
   

  	
  5.5.

  	
  Material Adverse Change

  	
   

  
	
   

  	
  5.6.

  	
  Taxes

  	
   

  
	
   

  	
  5.7.

  	
  Litigation and Contingent Obligations

  	
   

  
	
   

  	
  5.8.

  	
  Subsidiaries

  	
   

  
	
   

  	
  5.9.

  	
  ERISA

  	
   

  
	
   

  	
  5.10.

  	
  Accuracy of Information

  	
   

  
	
   

  	
  5.11.

  	
  Material Agreements

  	
   

  



 

















 


	
   

  	
  5.12.

  	
  Compliance With Laws

  	
   

  
	
   

  	
  5.13.

  	
  Ownership of Properties

  	
   

  
	
   

  	
  5.14.

  	
  Oil and Gas Interests

  	
   

  
	
   

  	
  5.15.

  	
  Plan Assets; Prohibited Transactions

  	
   

  
	
   

  	
  5.16.

  	
  Environmental Matters

  	
   

  
	
   

  	
  5.17.

  	
  Investment Company Act

  	
   

  
	
   

  	
  5.18.

  	
  Public Utility Holding Company Act

  	
   

  
	
   

  	
  5.19.

  	
  Post-Retirement Benefits

  	
   

  
	
   

  	
  5.20.

  	
  Insurance

  	
   

  
	
   

  	
  5.21.

  	
  Solvency.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  COLLATERAL AND GUARANTIES

  	
   

  
	
   

  	
  6.1.

  	
  Collateral Security and Guaranties.

  	
   

  
	
   

  	
  6.2.

  	
  Guarantees

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  COVENANTS

  	
   

  
	
   

  	
  7.1.

  	
  Financial and Other Reporting

  	
   

  
	
   

  	
  7.2.

  	
  Use of Proceeds

  	
   

  
	
   

  	
  7.3.

  	
  Notice of Default

  	
   

  
	
   

  	
  7.4.

  	
  Conduct of Business; Fiscal Year

  	
   

  
	
   

  	
  7.5.

  	
  Taxes

  	
   

  
	
   

  	
  7.6.

  	
  Insurance

  	
   

  
	
   

  	
  7.7.

  	
  Compliance with Laws

  	
   

  
	
   

  	
  7.8.

  	
  Maintenance of Properties

  	
   

  
	
   

  	
  7.9.

  	
  Inspection

  	
   

  
	
   

  	
  7.10.

  	
  Dividends

  	
   

  
	
   

  	
  7.11.

  	
  Indebtedness

  	
   

  
	
   

  	
  7.12.

  	
  Disqualified Stock

  	
   

  
	
   

  	
  7.13.

  	
  Merger

  	
   

  
	
   

  	
  7.14.

  	
  Sale of Assets

  	
   

  
	
   

  	
  7.15.

  	
  Investments and Acquisitions

  	
   

  
	
   

  	
  7.16.

  	
  Liens

  	
   

  
	
   

  	
  7.17.

  	
  Affiliates

  	
   

  
	
   

  	
  7.18.

  	
  Amendments to Organizational and Other
  Documents

  	
   

  
	
   

  	
  7.19.

  	
  Sale and Leaseback Transactions and other
  Off-Balance Sheet Liabilities

  	
   

  
	
   

  	
  7.20.

  	
  Negative Pledge

  	
   

  
	
   

  	
  7.21.

  	
  Financial Contracts

  	
   

  
	
   

  	
  7.22.

  	
  Financial Covenants.

  	
   

  
	
   

  	
  7.23.

  	
  Operation of Oil and Gas Interests.

  	
   

  
	
   

  	
  7.24.

  	
  Title Data

  	
   

  
	
   

  	
  7.25.

  	
  Rate Management Transactions

  	
   

  
	
   

  	
  7.26.

  	
  Limitation on Exploratory Drilling Expenses

  	
   

  
	
   

  	
  7.27.

  	
  Credit Parties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  DEFAULTS

  	
   

  
	
   

  	
  8.1.

  	
  Representations and Warranties

  	
   

  
	
   

  	
  8.2.

  	
  Payments

  	
   

  
	
   

  	
  8.3.

  	
  Certain Covenants

  	
   

  
	
   

  	
  8.4.

  	
  Other Material Indebtedness

  	
   

  
	
   

  	
  8.5.

  	
  Insolvency Proceedings

  	
   

  
	
   

  	
  8.6.

  	
  Appointment of Receiver

  	
   

  



 

















 


	
   

  	
  8.7.

  	
  Condemnation and Seizure

  	
   

  
	
   

  	
  8.8.

  	
  Judgments

  	
   

  
	
   

  	
  8.9.

  	
  Rate Management Obligations

  	
   

  
	
   

  	
  8.10.

  	
  Change of Control

  	
   

  
	
   

  	
  8.11.

  	
  Other Loan Documents

  	
   

  
	
   

  	
  8.12.

  	
  Guaranty

  	
   

  
	
   

  	
  8.13.

  	
  Unfunded Liabilities

  	
   

  
	
   

  	
  8.14.

  	
  Multiemployer Plan Withdrawal Liability

  	
   

  
	
   

  	
  8.15.

  	
  Reorganization or Termination of Multiemployer
  Plan

  	
   

  
	
   

  	
  8.16.

  	
  Environmental Laws

  	
   

  
	
   

  	
  8.17.

  	
  Collateral Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

  	
   

  
	
   

  	
  9.1.

  	
  Acceleration

  	
   

  
	
   

  	
  9.2.

  	
  Amendments

  	
   

  
	
   

  	
  9.3.

  	
  Preservation of Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  GENERAL PROVISIONS

  	
   

  
	
   

  	
  10.1.

  	
  Survival of Representations

  	
   

  
	
   

  	
  10.2.

  	
  Governmental Regulation

  	
   

  
	
   

  	
  10.3.

  	
  Headings

  	
   

  
	
   

  	
  10.4.

  	
  Entire Agreement

  	
   

  
	
   

  	
  10.5.

  	
  Several Obligations; Benefits of this
  Agreement

  	
   

  
	
   

  	
  10.6.

  	
  Expenses; Indemnification

  	
   

  
	
   

  	
  10.7.

  	
  Numbers of Documents

  	
   

  
	
   

  	
  10.8.

  	
  Accounting

  	
   

  
	
   

  	
  10.9.

  	
  Severability of Provisions

  	
   

  
	
   

  	
  10.10.

  	
  Nonliability of Lenders

  	
   

  
	
   

  	
  10.11.

  	
  Confidentiality

  	
   

  
	
   

  	
  10.12.

  	
  Nonreliance

  	
   

  
	
   

  	
  10.13.

  	
  Disclosure

  	
   

  
	
   

  	
  10.14.

  	
  USA PATRIOT ACT NOTIFICATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  ADMINISTRATIVE AGENT

  	
   

  
	
   

  	
  11.1.

  	
  Appointment; Nature of Relationship

  	
   

  
	
   

  	
  11.2.

  	
  Powers

  	
   

  
	
   

  	
  11.3.

  	
  General Immunity

  	
   

  
	
   

  	
  11.4.

  	
  No Responsibility for Loans, Recitals, etc

  	
   

  
	
   

  	
  11.5.

  	
  Action on Instructions of Lenders

  	
   

  
	
   

  	
  11.6.

  	
  Employment of the Agents and Counsel

  	
   

  
	
   

  	
  11.7.

  	
  Reliance on Documents; Counsel

  	
   

  
	
   

  	
  11.8.

  	
  ADMINISTRATIVE AGENT’S REIMBURSEMENT AND
  INDEMNIFICATION

  	
   

  
	
   

  	
  11.9.

  	
  Notice of Default

  	
   

  
	
   

  	
  11.10.

  	
  Rights as a Lender

  	
   

  
	
   

  	
  11.11.

  	
  Lender Credit Decision

  	
   

  
	
   

  	
  11.12.

  	
  Successor Administrative Agent

  	
   

  
	
   

  	
  11.13.

  	
  Administrative Agent and Arranger Fees

  	
   

  
	
   

  	
  11.14.

  	
  Delegation to Affiliates

  	
   

  
	
   

  	
  11.15.

  	
  Execution of Collateral Documents

  	
   

  
	
   

  	
  11.16.

  	
  Collateral Releases

  	
   

  



 

















 


	
  ARTICLE XII

  	
  SETOFF; RATABLE PAYMENTS

  	
   

  
	
   

  	
  12.1.

  	
  Setoff

  	
   

  
	
   

  	
  12.2.

  	
  Ratable Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
  BENEFIT OF AGREEMENT; ASSIGNMENTS;
  PARTICIPATIONS

  	
   

  	 

	
   

  	
  13.1.

  	
  Successors and Assigns

  	
   

  	 

	
   

  	
  13.2.

  	
  Participations.

  	
   

  	 

	
   

  	
  13.3.

  	
  Assignments.

  	
   

  	 

	
   

  	
  13.4.

  	
  Dissemination of Information

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  ARTICLE XIV

  	
  NOTICES

  	
   

  	 

	
   

  	
  14.1.

  	
  Notices

  	
   

  	 

	
   

  	
  14.2.

  	
  Change of Address

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  ARTICLE XV

  	
  COUNTERPARTS

  	
   

  	 

	
   

  	
  15.1.

  	
  Counterparts

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  ARTICLE XVI

  	
  CHOICE OF LAW; CONSENT TO JURISDICTION;
  WAIVER OF JURY TRIAL

  	
   

  	 

	
   

  	
  16.1.

  	
  CHOICE OF LAW

  	
   

  	 

	
   

  	
  16.2.

  	
  CONSENT TO JURISDICTION

  	
   

  	 

	
   

  	
  16.3.

  	
  WAIVER OF JURY TRIAL

  	
   

  	 

						



 

















 


ANNEXES


 


	
  Annex A

  	
   

  	
  -

  	
   

  	
  Commitments

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A-1

  	
   

  	
  -

  	
   

  	
  Form of Borrower’s Counsel Opinion

  
	
  Exhibit A-2

  	
   

  	
  -

  	
   

  	
  Form of Collateral Agent’s Local Counsel
  Opinion

  
	
  Exhibit
  B

  	
   

  	
  -

  	
   

  	
  Form
  of Compliance Certificate

  
	
  Exhibit
  C

  	
   

  	
  -

  	
   

  	
  Form
  of Assignment and Assumption Agreement

  
	
  Exhibit
  D

  	
   

  	
  -

  	
   

  	
  Form
  of Money Transfer Instructions

  
	
  Exhibit
  E

  	
   

  	
  -

  	
   

  	
  Form
  of Note

  
	
  Exhibit
  F

  	
   

  	
  -

  	
   

  	
  Form
  of Certificate of Effectiveness

  
	
  Exhibit
  G

  	
   

  	
  -

  	
   

  	
  Form
  of Pledge Agreements

  
	
  Exhibit
  H

  	
   

  	
  -

  	
   

  	
  Form
  of SWR Hedge Assumption Agreement

  
	
  Exhibit
  I

  	
   

  	
  -

  	
   

  	
  Form
  of Guaranty

  
	
  Exhibit
  J

  	
   

  	
  -

  	
   

  	
  Form
  of Joinder Agreement

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULES

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedule 1.1(a)

  	
   

  	
  -

  	
   

  	
  Existing Letters of Credit

  
	
  Schedule 1.1(b)

  	
   

  	
  -

  	
   

  	
  SWR Rate Management Transactions

  
	
  Schedule 1.1(c)

  	
   

  	
  -

  	
   

  	
  SWR Interest Rate Agreements

  
	
  Schedule
  1.1(d)

  	
   

  	
  -

  	
   

  	
  Permitted
  Liens

  
	
  Schedule 5.8

  	
   

  	
  -

  	
   

  	
  Subsidiaries

  
	
  Schedule 5.13

  	
   

  	
  -

  	
   

  	
  Ownership of Properties

  
	
  Schedule 7.11

  	
   

  	
  -

  	
   

  	
  Indebtedness

  
	
  Schedule
  7.15(vi)

  	
   

  	
   

  	
  Related
  Partnerships

  
	
  Schedule
  7.24

  	
   

  	
  -

  	
   

  	
  Title
  Curative Requirements

  



 

















 


SENIOR TERM CREDIT
AGREEMENT


 


This Agreement, dated as
of May 21, 2004, is among Clayton Williams Energy, Inc., a Delaware
corporation, CWEI-SWR, Inc., a Delaware corporation, Warrior Gas Co., a Texas
corporation, CWEI Acquisitions, Inc., a Delaware corporation, Romere Pass
Acquisition L.L.C., a Delaware limited liability company, CWEI Romere Pass
Acquisition Corp., a Delaware corporation, the Lenders, Bank One, NA, having
its principal office in Chicago, Illinois, as the Administrative Agent, Union
Bank of California, N.A., as Syndication Agent, and Bank of Scotland, as
Co-Agent.  The parties hereto agree as
follows:


 


DEFINITIONS


 


As used in this
Agreement:


 


“Acquisition” means any
transaction, or any series of related transactions, consummated on or after the
date of this Agreement, by which any Borrower or any Subsidiary of any Borrower
(i) acquires any going business or all or substantially all of the assets
of any firm, corporation or limited liability company, or division thereof,
whether through purchase of assets, merger or otherwise other than acquisitions
of Oil and Gas Interests permitted under Section 7.15(iii), or
(ii) directly or indirectly acquires (in one transaction or as the most
recent transaction in a series of transactions) at least a majority (in number
of votes) of the securities of a corporation which have ordinary voting power
for the election of directors (other than securities having such power only by
reason of the happening of a contingency) or a majority (by percentage or
voting power) of the outstanding ownership interests of a partnership or
limited liability company.


 


“Adjusted Proved Reserves
Present Value” means, as at any date of determination, the Proved Reserves
Present Value, excluding Attributed Interests.


 


“Administrative Agent”
means Bank One in its capacity as contractual representative of the Lenders
pursuant to Article XI, and not in its individual capacity as a Lender, and any
successor Administrative Agent appointed pursuant to Article XI.


 


“Advance” means the
borrowing hereunder made on the Closing Date, and any subsequent conversions or
continuations thereof, (i) made by the Lenders on the same Borrowing Date, or
(ii) converted or continued by the Lenders on the same date of conversion
or continuation, consisting, in either case, of the aggregate amount of the
several Loans of the same Type and, in the case of Eurodollar Loans, for the
same Interest Period.


 


“Advance Payment
Contract” means any contract whereby any Credit Party either (a) receives
or becomes entitled to receive (either directly or indirectly) any payment (an
“Advance Payment”) to be applied toward payment of the purchase price of
Hydrocarbons produced or to be produced from Oil and Gas Interests owned by any
Credit Party and which Advance Payment is, or is to be, paid in advance of
actual delivery of such production to or for the account of the purchaser
regardless of such production, or (b) grants an option or right of refusal
to the purchaser to take delivery of such production in lieu of payment, and,
in either of the foregoing instances, the Advance Payment is, or is to be,
applied as payment in full for such production when sold and delivered or is,
or is to be, applied as payment for a portion only of the purchase price
thereof or of a percentage or share of such production; provided  that
inclusion of the standard “take or pay” provision in any gas sales or purchase
contract or any other similar contract shall not, in and of itself, constitute
such contract as an Advance Payment Contract for the purposes hereof.


 


1

















 


“Affected Lender” is
defined in Section 0.


 


“Affiliate” of any Person
means any other Person directly or indirectly controlling, controlled by or
under common control with such Person. 
A Person shall be deemed to control another Person if the controlling
Person owns 10% or more of any class of voting securities (or other ownership
interests) of the controlled Person or possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of the
controlled Person, whether through ownership of stock, by contract or
otherwise.


 


“Agent” means each of the
Administrative Agent and Collateral Agent.


 


“Aggregate Commitment”
means the aggregate of the Commitments of all the Lenders, as reduced from time
to time pursuant to the terms hereof.


 


“Agreement” means this
credit agreement, as it may be amended or modified and in effect from time to
time.


 


“Agreement Accounting
Principles” means generally accepted accounting principles as in effect in the
United States of America from time to time, applied in a manner consistent with
that used in preparing the financial statements referred to in Section 0.


 


“Alternate Base Rate”
means, for any day, a rate of interest per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of the Federal Funds
Effective Rate for such day plus one half of one percent (.50%) per annum.


 


“Annex” refers to an
annex attached to this Agreement, unless another document is specifically
referenced.


 


“Applicable Margin”
means, with respect to any Advance of any Type at any time, the percentage rate
per annum which is applicable at such time with respect to Advances of such
Type set forth in the Pricing Schedule.


 


“Approved Counterparty”
means, at any time and from time to time, (i) any Person engaged in the
business of writing Rate Management Transactions for commodity, interest rate
or currency risk that is acceptable to the Senior Revolving Agent or, if the
Indebtedness evidenced by the Senior Revolving Credit Agreement has been paid
in full and all financing commitments thereunder have been terminated, the
Administrative Agent, and has, at the time any Borrower or any Guarantor enters
into a Rate Management Transaction with such Person, a credit rating of BBB or
better from S&P and (ii) any Bank Counterparty.


 


“Approved Fund” means any
Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a
Lender or (c) an entity that administers or manages a Lender.


 


“Approved Petroleum
Engineer” means any reputable firm of independent petroleum engineers selected
by CWEI and approved by the Administrative Agent, which approval shall not be
unreasonably withheld.


 


“Arranger” means Banc One
Capital Markets, Inc., a Delaware corporation, and its successors, in its
capacity as lead arranger and sole book runner.


 


“Article” means an
article of this Agreement unless another document is specifically referenced.


 


2

















 


“Attributed Interests”
means the Oil and Gas Interests of the Related Partnerships attributed to the
Credit Parties in the Reserve Report.


 


“Authorized Officer”
means, as to any Person, any of its Chief Executive Officer, its President, its
Directors, its Managers (in the case of a limited liability company), its Chief
Financial Officer, its Chief Accounting Officer, its Vice Presidents, its
Treasurer or its corporate Secretary, acting singly.


 


“Bank” means any
financial institution from time to time a party to the Senior Revolving Credit
Agreement as a lender and “Banks” means all Banks.


 


“Bank Counterparty” means
each Bank or any Affiliate of a Bank counterparty to a Rate Management
Transaction.


 


“Bank One” means Bank
One, NA, a national banking association, having its principal office in
Chicago, Illinois, in its individual capacity, and its successors.


 


“Blue Heel” means Blue
Heel Company, a Delaware corporation, and its successors and assigns.


 


“Borrower Representative”
means, initially, CWEI and from time to time after the Closing Date, any other
Borrower Borrowers may designate as its replacement upon written notice to the
Administrative Agent in accordance with Article XIV.


 


“Borrowers” means CWEI,
Merger Sub and each of their respective successors and assigns including from
and after the effective time of the SWR Merger, SWR, and each individually, a
“Borrower”.


 


“Borrowing Date” means a
date on which an Advance is made hereunder.


 


“Borrowing Notice” is
defined in Section 0.


 


“Business Day” means (i)
with respect to any borrowing, payment or rate selection of Eurodollar
Advances, a day (other than a Saturday or Sunday) on which banks generally are
open in Chicago, Illinois and New York City, New York for the conduct of substantially
all of their commercial lending activities, interbank wire transfers can be
made on the Fedwire system and dealings in United States dollars are carried on
in the London interbank market and (ii) for all other purposes, a day
(other than a Saturday or Sunday) on which banks generally are open in Chicago,
Illinois for the conduct of substantially all of their commercial lending
activities and interbank wire transfers can be made on the Fedwire system.


 


“Capital Market Net
Proceeds” means the gross proceeds of the Capital Market Event, net of all
reasonable transaction costs, minus the proceeds of the Capital Markets Event
paid to the Banks pursuant to Section 2.7.2 of the Senior Revolving Credit
Agreement for the mandatory repayment of the Loans (as defined in the Senior
Revolving Credit Agreement) in an amount sufficient to cause the Available
Aggregate Commitment (as defined in the Senior Revolving Credit Agreement) to
be equal to or greater than $15,000,000 after giving effect to such payment.


 


“Capital Markets Event”
means the consummation by CWEI of a private offering of its Capital Stock on
terms and conditions acceptable to the Arranger.


 


“Capital Stock” means any
and all shares, interests, participations or other equivalents  (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than
a corporation), including, without limitation, partnership interests and
membership interests, and any


 


3

















 


and all warrants, rights or options to purchase or
other arrangements or rights to acquire any of the foregoing.


 


“Capitalized Lease” of a
Person means any lease of Property by such Person as lessee which would be
capitalized on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.


 


“Capitalized Lease
Obligations” of a Person means the amount of the obligations of such Person
under Capitalized Leases which would be shown as a liability on a balance sheet
of such Person prepared in accordance with Agreement Accounting Principles.


 


“Cash Equivalent
Investments” means (i) short-term obligations of, or fully guaranteed by,
the United States of America, (ii) commercial paper rated A-1 or better by
S&P or P-1 or better by Moody’s, (iii) demand deposit accounts
maintained in the ordinary course of business, and (iv) certificates of
deposit issued by and time deposits with commercial banks (whether domestic or
foreign) having capital and surplus in excess of $100,000,000; provided,
that
in each case with respect to the foregoing clauses (i), (ii) and (iv) that the
same provides for payment of both principal and interest (and not principal
alone or interest alone) and is not subject to any contingency regarding the
payment of principal or interest.


 


“Certificate of
Effectiveness” means a Certificate of Effectiveness in the form of
Exhibit F attached hereto to be executed by each Borrower and the
Administrative Agent upon the satisfaction of each of the conditions precedent
contained in Article IV hereof.


 


“Change” is defined in
Section 0.


 


“Change of Control” means
(i) the acquisition by any Person, or two or more Persons acting in concert, of
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of thirty-five
percent (35%) or more of the outstanding voting securities of CWEI; or
(ii) the Williams Group shall cease to own, free and clear of all Liens or
other encumbrances, at least twenty percent (20%) of the outstanding voting
securities of CWEI on a fully diluted basis.


 


“Closing Date” means the
date upon which all of the conditions precedent set forth in Article IV have
been satisfied, and each Borrower and the Administrative Agent have executed
and delivered the Certificate of Effectiveness; provided, that,
in no event shall such date be later than May 21, 2004.


 


“Closing Documents” means
the Collateral Agency Agreement, the SWR Acquisition Documents, the Senior
Revolving Credit Documents, and all other material documents, instruments and
agreements executed or delivered by any Credit Party in connection with, or
otherwise pertaining to, the Closing Transactions.


 


“Closing Transactions”
means the transactions to occur on the Closing Date, including, without
limitation: (a) the completion of the SWR Acquisition pursuant to the
terms of the SWR Acquisition Documents, (b) the execution and delivery of
the Senior Revolver Credit Documents, and the closing and consummation of the
transactions contemplated thereby pursuant to the terms thereof, and the
receipt by the Borrowers of not more than $170,000,000.00 from the initial
advance of revolving loans under such documents, (c) the assignment to,
and assumption by, Bank One of the SWR Rate Management Transactions pursuant to
the SWR Hedge Assumption Agreement, (d) the completion of the Partnership
Acquisition pursuant to the terms of the Partnership Acquisition Documents provided,
that
the aggregate purchase price does not exceed $7,000,000 net of SWR’s
partnership interests, (e) repayment in full of all obligations, Indebtedness
and liabilities accrued and outstanding under the Existing Credit Agreements as


 


4

















 


of the Closing Date, including, without limitation,
(i) the entire outstanding principal balance of the loans and advances
made (and as defined) thereunder, (ii) all accrued but unpaid interest,
and (iii) all accrued but unpaid commitment and other fees, (f) the
cancellation (or replacement with Facility LCs (as defined in the Senior
Revolving Credit Agreement)) of all Existing Letters of Credit, (g) the
termination and release of the Existing Mortgages and all other Liens securing
the obligations, Indebtedness and liabilities of SWR or any of its Subsidiaries
under the Existing Credit Agreements (including, without limitation, the
delivery of UCC-3 releases with respect to all uniform commercial code filings
made under or pursuant to the Existing Credit Agreements), and the delivery to
SWR of all original certificates and stock powers pledged and delivered by SWR
and its Subsidiaries pursuant to the terms of the Existing Credit Agreements as
security for SWR’s obligations thereunder, (h) the release of all
guarantees of the obligations, Indebtedness and liabilities of any Credit Party
under the Existing Credit Agreements, (i) the termination of the Existing
Credit Agreements, and the delivery to SWR of (or the written commitment of the
holders thereof to promptly deliver after the Closing Date) each original
promissory note issued under the Existing Credit Agreements marked “Terminated
and Paid in Full”, (j) the repayment in full of all Indebtedness of Southwest
Partners and Tex-Hal to Western National Bank and the release and termination
of any and all Liens securing such Indebtedness, and (k) the payment of
all fees and expenses of the Administrative Agent in connection with the credit
facilities provided herein.


 


“Code” means the Internal
Revenue Code of 1986, as amended, reformed or otherwise modified from time to
time.


 


“Collateral Agency
Agreement” means that certain Collateral Agency and Intercreditor Agreement
dated as of the date hereof by and among the Collateral Agent, the Senior
Revolving Agent and Banks party to the Senior Revolving Credit Agreement, the
Administrative Agent, the Lenders, each Borrower and each Guarantor as amended,
modified, supplemented or restated from time to time.


 


“Collateral Agent” means
Bank One, NA, in its capacity as collateral agent under the Collateral Agency Agreement,
and any successor Collateral Agent appointed pursuant to the terms of the
Collateral Agency Agreement.


 


“Collateral Documents”
means, collectively, this Agreement, all Mortgages, Security Agreements,
Assignments of Production and Financing Statements, the Pledge Agreements and
other collateral documents covering the Oil and Gas Interests and related
personal property, equipment, oil and gas inventory and proceeds of the
foregoing, all Guaranties, all pledge agreements and all collateral assignments
of notes and Liens, all such documents to be in form and substance reasonably
satisfactory to the Administrative Agent.


 


“Commitment” means, for
each Lender, the obligation of such Lender to make Loans not exceeding the
amount set forth opposite such Lender’s name on Annex A attached hereto or as
set forth in any Notice of Assignment relating to any assignment that has
become effective pursuant to Section 0 or as such amount may be modified
from time to time pursuant to the terms hereof.


 


“Consolidated” or
“consolidated”, when used with reference to any accounting term, means the
amount described by such accounting term, determined on a consolidated basis in
accordance with Agreement Accounting Principles, after elimination of
intercompany items.


 


“Consolidated EBITDAX”
means, for any Person for any period, without duplication:
(a) Consolidated Net Income of such Person for such period; plus, to the
extent deducted in the calculation of Consolidated Net Income, (b) the sum
of (i) income or franchise Taxes paid or accrued; (ii) Consolidated
Net Interest Expense; (iii) amortization, depletion and depreciation
expense; (iv) any non-cash losses or charges on any Rate Management
Transaction resulting from the requirements of


 


5

















 


SFAS 133 for that period; (v) oil and gas exploration
expenses for such period; (vi) losses from sales or other dispositions of
assets (other than Hydrocarbons produced in the normal course of business) and
other extraordinary or non-recurring losses, and (vii) other non-cash
charges (excluding accruals for cash expenses made in the ordinary course of
business); less, to the extent included in the calculation of Consolidated Net
Income, (c) the sum of (i) the income of such Person (other than
Subsidiaries of such Person and, with respect to CWEI, the Related
Partnerships) unless such income is received by such Person in a cash
distribution; (ii) any non-cash gains on any Rate Management Transaction
resulting from the requirements of SFAS 133 for that period;  (iii) extraordinary or non-recurring
gains; and (iv) gains from sales or other dispositions of assets (other than
Hydrocarbons produced in the normal course of business).


 


“Consolidated Funded
Indebtedness” means, as of any date, without duplication and with respect to
any Person, (i) all obligations for borrowed money, (ii) all
obligations evidenced by bonds, debentures, notes, or other similar
instruments, (iii) all other indebtedness (including obligations under
Capitalized Leases, other than usual and customary oil, gas and mineral leases)
on which interest charges are customarily paid or accrued, (iv) all
guarantees of indebtedness, including reimbursement obligations with respect to
letters of credit, (v) the unfunded or unreimbursed portion of all letters
of credit issued for the account of such Person, (vi) any amount owed by
such Person representing the deferred purchase price of property or services
other than accounts payable incurred in the ordinary course of business and in
accordance with customary trade terms and which are not more than 120 days past
the invoice date, and (vii) all liability as a general partner of a
partnership for obligations of that partnership of the nature described in
(i) through (vi) preceding.


 


“Consolidated Net Income”
means, for any Person for any period, the net income (or loss) of such Person
and its Consolidated Subsidiaries for such period.


 


“Consolidated Net
Interest Expense” means, for any Person for any period, the remainder of the
following for such Person and its Consolidated Subsidiaries for such period:
(a) interest expense, minus (b) interest income.


 


“Consolidated Subsidiary”
or “Consolidated Subsidiaries” means, for any Person, any Subsidiary or other
entity the accounts of which would be consolidated with those of such Person in
its consolidated financial statements.


 


“Contingent Obligation”
of a Person means any agreement, undertaking or arrangement by which such
Person assumes, guarantees, endorses, contingently agrees to purchase or provide
funds for the payment of, or otherwise becomes or is contingently liable upon,
the obligation or liability of any other Person, or agrees to maintain the net
worth or working capital or other financial condition of any other Person, or
otherwise assures any creditor of such other Person against loss, including,
without limitation, any comfort letter, operating agreement, take-or-pay
contract or the obligations of any such Person as general partner of a
partnership with respect to the liabilities of the partnership.


 


“Controlled Group” means
all members of a controlled group of corporations or other business entities
and all trades or businesses (whether or not incorporated) under common control
which, together with CWEI or any of its Subsidiaries, are treated as a single
employer under Section 414 of the Code.


 


“Conversion/Continuation
Notice” is defined in Section 0.


 


“Credit Parties” means,
collectively, each Borrower and each Guarantor, and “Credit Party” means any
one of the foregoing.


 


6

















 


“Crude Oil” means all
crude oil and condensate.


 


“Current Financials”
means (a) the annual audited consolidated balance sheet of CWEI and the
related consolidated statements of operations and cash flows for the Fiscal Year
ended December 31, 2003, (b) the quarterly unaudited consolidated balance
sheet of CWEI for the Fiscal Quarter ended March 31, 2004, and the related
unaudited consolidated statements of operations and cash flows for the portion
of CWEI’s Fiscal Year ended March 31, 2004, and (c) the annual
audited consolidated balance sheet of SWR and the related consolidated
statements of operations and cash flows for the Fiscal Year ended
December 31, 2003.


 


“CWEI” means Clayton
Williams Energy, Inc., a Delaware corporation, and its successors and assigns.


 


“CWEI Acquisitions” means
CWEI Acquisitions, Inc., a Delaware corporation, and its successors and
assigns.


 


“Default” means an event
described in Article VIII.


 


“Disqualified Stock”
means any Capital Stock which, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the sole option of
the holder thereof, in whole or in part, on or prior to the Facility
Termination Date.


 


“Dollar”, “Dollars” and
the sign “$” mean lawful money of the United States of America.


 


“Domestic Subsidiary”
means, with respect to any Person, a Subsidiary of such Person that is
incorporated or formed under the laws of the United States of America or the
District of Columbia.


 


“Environmental Laws”
means any and all federal, state, provincial, local and foreign statutes, laws,
judicial decisions, regulations, ordinances, rules, judgments, orders, decrees,
plans, injunctions, permits, concessions, grants, franchises, licenses,
agreements and other governmental restrictions relating to (i) the
protection of the environment, (ii) the effect of the environment on human
health, (iii) emissions, discharges or releases of pollutants,
contaminants, hazardous substances or wastes into surface water, ground water
or land, or (iv) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, hazardous
substances or wastes or the clean-up or other remediation thereof.


 


“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and any rule or regulation issued thereunder.


 


“Eurodollar Advance”
means an Advance which, except as otherwise provided in Section 0, bears
interest at the applicable Eurodollar Rate.


 


“Eurodollar Base Rate”
means, with respect to a Eurodollar Advance for the relevant Interest Period,
the applicable British Bankers’ Association LIBOR rate for deposits in Dollars
as reported by any generally recognized financial information service as of
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period, and having a maturity equal to such Interest Period, provided
that, if no such British Bankers’ Association LIBOR rate is available to the
Administrative Agent, the applicable Eurodollar Base Rate for the relevant
Interest Period shall instead be the rate determined by the Administrative
Agent to be the rate at which Bank One or one of its Affiliate banks offers to
place deposits in Dollars with first-class banks in the London interbank market
at approximately 11:00 a.m.


 


7

















 


(London time) two Business Days prior to the first day
of such Interest Period, in the approximate amount of Bank One’s relevant
Eurodollar Loan and having a maturity equal to such Interest Period.


 


“Eurodollar Loan” means a
Loan which, except as otherwise provided in Section 0, bears interest at
the applicable Eurodollar Rate.


 


“Eurodollar Rate” means,
with respect to a Eurodollar Advance for the relevant Interest Period a per
annum rate of interest (based on a year of 360 days) equal to, the sum of
(i) the quotient of (a) the Eurodollar Base Rate applicable to such
Interest Period, divided by (b) one minus the Reserve Requirement (expressed as
a decimal) applicable to such Interest Period, plus (ii) the Applicable
Margin.


 


“Evaluated Properties”
means all Oil and Gas Interests of the Credit Parties and all of the Attributed
Interests described in the Reserve Report and evaluated by Lenders for purposes
of determining CWEI’s compliance with Section 0 or otherwise delivered to
the Administrative Agent pursuant to this Agreement.


 


“Excluded Taxes” means,
in the case of each Lender or applicable Lending Installation and the
Administrative Agent, taxes imposed on its overall net income, and franchise
taxes imposed on it, by (i) the jurisdiction under the laws of which such
Lender or the Administrative Agent is incorporated or organized or
(ii) the jurisdiction in which the Administrative Agent’s or such Lender’s
principal executive office or such Lender’s applicable Lending Installation is
located.


 


“Exhibit” refers to an
exhibit attached to this Agreement, unless another document is specifically
referenced.


 


“Existing Credit
Agreements” means, collectively, that certain (i) Amended and Restated
Credit Agreement dated as of September 15, 2003, by and among Union Bank of
California, N.A., as the Administrative Agent, lead arranger and bookrunner,
Guaranty Bank, as documentation agent, the lenders a party thereto, and SWR, as
the borrower thereunder, and (ii) Senior Second Lien Secured Credit
Agreement dated as of September 15, 2003, by and among SWR, as the borrower
thereunder, Macquarie, in its individual capacity and as administrative agent,
and the subordinated noteholders from time to time a party thereto, as each may
have been amended or modified prior to the date hereof.


 


“Existing Letters of
Credit” means the letters of credit issued prior to the SWR Merger for the
account of SWR or any of its Subsidiaries and outstanding on the date hereof
and described on Schedule 1.1(a).


 


“Existing Mortgages”
means the mortgages, deeds of trust, security agreements, assignments, pledges
and other documents, instruments and agreements, which establish Liens on
certain of SWR’s Oil and Gas Interests to secure SWR’s obligations under the
Existing Credit Agreements.


 


“Existing Reserve Report”
means the Reserve Report dated as of June 1, 2004.


 


“Facility Termination
Date” means May 21, 2008.


 


“Federal Funds Effective
Rate” means, for any day, an interest rate per annum equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published for such day (or, if such day is not a Business Day, for the
immediately preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations at approximately 10:00 a.m. (Chicago time) on such
day on such transactions received by the


 


8

















 


Administrative Agent from three Federal funds brokers
of recognized standing selected by the Administrative Agent in its sole
discretion.


 


“Financial Contract” of a
Person means (i) any exchange-traded or over-the-counter futures, forward, swap
or option contract or other financial instrument with similar characteristics,
or (ii) any Rate Management Transaction.


 


“Fiscal Quarter” means
the three (3) month periods ending on March 31, June 30, September 30 and
December 31 of each Fiscal Year.


 


“Fiscal Year” means a
twelve (12) month period ending December 31.


 


“Floating Rate” means,
for any day, a rate per annum equal to (i) the Alternate Base Rate for
such day plus (ii) the Applicable Margin, in each case changing when and
as the Alternate Base Rate changes.


 


“Floating Rate Advance”
means an Advance which, except as otherwise provided in Section 0, bears
interest at the Floating Rate.


 


“Floating Rate Loan”
means a Loan which, except as otherwise provided in Section 0, bears
interest at the Floating Rate.


 


“Fund” means any Person
(other than a natural person) that is (or will be) engaged in making,
purchasing, holding or otherwise investing in commercial loans and similar
extensions of credit in the ordinary course of its business.


 


“Gas Balancing Agreement”
means any agreement or arrangement whereby any Credit Party, or any other party
having an interest in any Hydrocarbons to be produced from Oil and Gas
Interests in which any Credit Party owns an interest, has a right to take more
than its proportionate share of production therefrom.


 


“Guarantor” means
Warrior, CWEI Acquisitions, Romere and Romere Corp. and after the effective
time of the SWR Merger, each Material Domestic Subsidiary (other than any
Borrower) and, if required pursuant to Section 7.28, each Domestic Subsidiary
of CWEI (other than a Borrower), that hereafter executes and delivers to the
Administrative Agent and the Lenders, a Guaranty.


 


“Guaranty” means a
Guaranty, substantially in the form of Exhibit I to be executed by each
Material Domestic Subsidiary of CWEI (other than any Borrower) in favor of the
Administrative Agent and the Lenders, pursuant to which such Subsidiary
guaranties payment and performance in full of the Obligations, as it may be
amended or modified and in effect from time to time.


 


“Highest Lawful Rate”
shall mean, on any day, the maximum nonusurious rate of interest permitted for
that day by whichever of applicable federal or Texas law permits the higher
interest rate, stated as a rate per annum. 
On each day, if any, that Chapter 303 of the Texas Finance Code, as
amended (formerly Tex. Rev. Civ. Stat. Ann. Art. 5069-1D.003) establishes the
Highest Lawful Rate, such rate shall be the “indicated (weekly) rate ceiling”
(as defined in Chapter 303 of the Texas Finance Code, as amended) for that day.


 


“Hydrocarbons” means all
Crude Oil and Natural Gas produced from or attributable to the Oil and Gas
Interests of CWEI and its Subsidiaries.


 


9

















 


“Incentive Partnership”
means any trust or limited partnership to which a Credit Party, as general
partner, contributes a portion of its after-payout working interest in wells
drilled within certain areas, and key employees and consultants who promote the
drilling and acquisition programs, as limited partners contribute cash.


 


“Indebtedness” of a
Person means such Person’s (i) obligations for borrowed money,
(ii) obligations representing the deferred purchase price of Property or
services (other than accounts payable arising in the ordinary course of such
Person’s business payable on terms customary in the trade and which are not
outstanding more than one hundred twenty (120) days past the invoice date),
(iii) obligations, whether or not assumed, secured by Liens or payable out
of the proceeds or production from Property now or hereafter owned or acquired
by such Person, (iv) obligations which are evidenced by notes,
acceptances, or other instruments, (v) obligations of such Person to
purchase securities or other Property arising out of or in connection with the
sale of the same or substantially similar securities or Property,
(vi) with respect to CWEI or any of its Subsidiaries, Vendor Financings,
(vii) Contingent Obligations, (viii) Capitalized Lease Obligations,
(ix) Letters of Credit, (x) Rate Management Obligations and
(xi) any other obligation for borrowed money or other similar financial
accommodation which in accordance with Agreement Accounting Principles would be
shown as a liability on the consolidated balance sheet of such Person.


 


“Interest Period” means,
with respect to a Eurodollar Advance, a period of one, two, three or, if
available, six months commencing on a Business Day selected by the Borrower
Representative pursuant to this Agreement. 
Such Interest Period shall end on the day which corresponds numerically
to such date one, two, three or six months thereafter, provided, however, that if
there is no such numerically corresponding day in such next, second, third or
sixth succeeding month, such Interest Period shall end on the last Business Day
of such next, second, third or sixth succeeding month.  If an Interest Period would otherwise end on
a day which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, provided, however, that if said next
succeeding Business Day falls in a new calendar month, such Interest Period
shall end on the immediately preceding Business Day.


 


“Investment” of a Person
means any loan, advance (other than commission, travel and similar advances to
officers and employees made in the ordinary course of business), extension of
credit (other than accounts receivable arising in the ordinary course of
business on terms customary in the trade) or contribution of capital by such
Person; stocks, bonds, mutual funds, partnership interests, notes, debentures
or other securities or interests owned by such Person; any deposit accounts and
certificate of deposit owned by such Person; and structured notes, derivative
financial instruments and other similar instruments or contracts owned by such Person.


 


“Joinder Agreement” means
a joinder agreement in the form attached hereto as Exhibit J.


 


“Lenders” means the
lending institutions listed on Annex A and their respective successors and
assigns.


 


“Lending Installation”
means, with respect to a Lender or the Administrative Agent, the office,
branch, Subsidiary or Affiliate of such Lender or the Administrative Agent
listed on Annex A attached hereto or otherwise selected by such Lender or the
Administrative Agent pursuant to Section 0.


 


“Letter of Credit” of a
Person means a letter of credit or similar instrument which is issued upon the
application of such Person or upon which such Person is an account party or for
which such Person is in any way liable.


 


10

















 


“Lien” means any lien
(statutory or other), mortgage, charge, pledge, hypothecation, assignment,
deposit arrangement, encumbrance or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever (including,
without limitation, the interest of a vendor or lessor under any conditional
sale, Capitalized Lease or other title retention agreement).


 


“Loan” means, with
respect to a Lender, such Lender’s loan made pursuant to Article II (or any
conversion or continuation thereof).


 


“Loan Documents” means,
collectively, this Agreement, the Collateral Agency Agreement, any Notes issued
pursuant to Section 0, the Collateral Documents and any Guaranty.


 


“Macquarie” means
Macquarie Americas Corp., a Delaware corporation, and its successors and
assigns.


 


“Material Adverse Effect”
means a material adverse effect on (a) the assets, liabilities, financial
condition, results of operations or prospects of the Credit Parties taken as a
whole, (b) the right or ability of any Credit Party to fully, completely and
timely perform its material obligations under the Loan Documents, or (c) the
validity or enforceability of any Loan Document against any Credit Party which
is a party thereto or the rights and remedies of the Administrative Agent, the
Collateral Agent or the Lenders thereunder.


 


“Material Domestic
Subsidiary” means any Domestic Subsidiary of CWEI other than a Borrower that
owns or holds Property (including Oil and Gas Interests) with an aggregate fair
market value greater than five percent (5%) of the aggregate fair market value
of all of the Property (including Oil and Gas Interests) of CWEI and its
Subsidiaries taken as a whole.


 


“Material Gas Imbalance”
means, with respect to all Gas Balancing Agreements to which any Credit Party
is a party or by which any Oil and Gas Interests owned by any Credit Party is
bound, a net overproduced gas imbalance to any Credit Party in excess of
$1,500,000.


 


“Material Indebtedness”
means Indebtedness, other than indebtedness with respect to Rate Management
Obligations, in an outstanding principal amount of $2,000,000 or more in the
aggregate (or the equivalent thereof in any currency other than Dollars).


 


“Material Indebtedness
Agreement” means any agreement under which any Material Indebtedness was
created or is governed or which provides for the incurrence of Indebtedness in
an amount which would constitute Material Indebtedness (whether or not an
amount of Indebtedness constituting Material Indebtedness is outstanding
thereunder).


 


“Merger Sub” means
CWEI-SWR, Inc., a Delaware corporation, and its successors and assigns.


 


“Moody’s” means Moody’s
Investors Service, Inc.


 


“Mortgages” means all
mortgages, deeds of trust, amendments to mortgages, security agreements,
assignments of production, pledge agreements, collateral mortgages, collateral
chattel mortgages, collateral assignments, financing statements and other
documents, instruments and agreements evidencing, creating, perfecting or
otherwise establishing the Liens required by Section 0.  All Mortgages shall be in form and substance
satisfactory to the Administrative Agent in its sole discretion.


 


11

















 


“Multiemployer Plan”
means a Plan maintained pursuant to a collective bargaining agreement or any
other arrangement to which any Borrower or any member of the Controlled Group
is a party to which more than one employer is obligated to make contributions.


 


“Natural Gas” means all
natural gas, distillate or sulphur, natural gas liquids and all products
recovered in the processing of natural gas (other than condensate) including,
without limitation, natural gasoline, coalbed methane gas, casinghead gas,
iso-butane, normal butane, propane and ethane (including such methane allowable
in commercial ethane).


 


“Non-Consenting Lender”
is defined in Section 0.


 


“Non-U.S. Lenders” is
defined in Section 0.


 


“Note” is defined in
Section 0.


 


“Obligations” means all
obligations of every nature of each Credit Party from time to time owed to the
Agents (including former Agents), the Lenders or any of them, under any Loan
Document, whether for principal, interest (including interest which, but for
the filing of a petition in bankruptcy with respect to such Credit Party, would
have accrued on any Obligation, whether or not a claim is allowed against such
Credit Party for such interest in the related bankruptcy proceeding), fees,
expenses, indemnification or otherwise.


 


“Off-Balance Sheet
Liability” of a Person means (i) any repurchase obligation or liability of
such Person with respect to accounts or notes receivable sold by such Person,
(ii) any liability under any Sale and Leaseback Transaction which is not a
Capitalized Lease, (iii) any liability under any so-called “synthetic
lease” transaction entered into by such Person, (iv) any Material Gas
Imbalance, (v) any Advance Payment Contract, or (vi) any obligation
arising with respect to any other transaction which is the functional
equivalent of or takes the place of borrowing but which does not constitute a
liability on the balance sheets of such Person, but excluding from the
foregoing clauses (iii) through (vi) Operating Leases and usual and
customary oil, gas and mineral leases.


 


“Oil and Gas Interest(s)”
means: (a) direct and indirect interests in and rights with respect to oil,
gas, mineral and related properties and assets of any kind and nature, direct
or indirect, including, without limitation, working, royalty and overriding
royalty interests, mineral interests, leasehold interests, production payments,
operating rights, net profits interests, other non-working interests,
contractual interests, non-operating interests and rights in any pooled,
unitized or communitized acreage by virtue of such interest being a part
thereof; (b) interests in and rights with respect to Hydrocarbons and other
minerals or revenues therefrom and contracts and agreements in connection
therewith and claims and rights thereto (including oil and gas leases,
operating agreements, unitization, communitization and pooling agreements and orders,
division orders, transfer orders, mineral deeds, royalty deeds, oil and gas
sales, hedging, exchange and processing contracts and agreements and, in each
case, interests thereunder), and surface interests, fee interests, reversionary
interests, reservations and concessions related to any of the foregoing; (c)
easements, rights-of-way, licenses, permits, leases, and other interests
associated with, appurtenant to, or necessary for the operation of any of the
foregoing; (d) interests in oil, gas, water, disposal and injection wells,
equipment and machinery (including well equipment and machinery), oil and gas
production, gathering, transmission, compression, treating, processing and
storage facilities (including tanks, tank batteries, pipelines and gathering
systems), pumps, water plants, electric plants, gasoline and gas processing
plants, refineries and other tangible or intangible, movable or immovable, real
or personal property and fixtures located on, associated with, appurtenant to,
or necessary for the operation of any of the foregoing; and (e) all seismic,
geological, geophysical and engineering records, data, information, maps,
licenses and interpretations.


 


12

















 


“Operating Lease” of a
Person means any lease of Property (other than a Capitalized Lease or a lease
of an Oil and Gas Interest) by such Person as lessee which has an original term
(including any required renewals and any renewals effective at the option of
the lessor) of one year or more.


 


“Organizational
Documents” means (i) with respect to any corporation, its certificate or
articles of incorporation or organization, as amended, and its by-laws, as
amended, (ii) with respect to any limited partnership, its certificate of
limited partnership, as amended, and its partnership agreement, as amended,
(iii) with respect to any general partnership, its partnership agreement,
as amended, and (iv) with respect to any limited liability company, its
articles of organization, as amended, and its operating agreement, as amended.


 


“Other Taxes” is defined
in Section 0.


 


“Participants” is defined
in Section 0.


 


“Partnership Acquisition”
means the acquisition by CWEI of certain Oil and Gas Interests and the stock of
Tex-Hal from Southwest Partners pursuant to the terms of the Partnership
Acquisition Documents.


 


“Partnership Acquisition
Documents” means the Partnership Purchase Agreement and all other certificates
and other documents and instruments now or hereafter executed and delivered by,
between or among CWEI, SWR and Southwest Partners pursuant to the Partnership
Purchase Agreement or in connection with the Partnership Acquisition.


 


“Partnership Purchase
Agreement” means that certain Asset Purchase Agreement dated as of May 21,
2004, by and among CWEI, SWR and Southwest Partners, as amended or modified.


 


“Payment Date” means the
last day of each Fiscal Quarter in the case of Floating Rate Loans and, in the
case of Eurodollar Loans, the last day of the applicable Interest Period, and
if such Interest Period is longer than three (3) months, on the last day of
each three (3) month interval during such Interest Period.


 


“PBGC” means the Pension
Benefit Guaranty Corporation, or any successor thereto.


 


“Permitted Liens”  means (i) royalties, overriding royalties,
reversionary interests, production payments and similar burdens granted by any
Credit Party or Related Partnership with respect to the Oil and Gas Interests
owned by such Credit Party or Related Partnership, as the case may be, if the
net cumulative effect of such burdens does not operate to deprive any Credit
Party or any Related Partnership of any material right in respect of its assets
or properties (except for rights customarily granted with respect to such
interests); (ii) statutory Liens, including Liens for taxes or other
assessments that are not yet delinquent (or that, if delinquent, are being
contested in good faith by appropriate proceedings and for which a Credit Party
or a Related Partnership, as the case may be, has set aside on its books adequate
reserves in accordance with Agreement Accounting Principles);
(iii) easements, rights of way, servitudes, permits, surface leases and
other rights in respect to surface operations, pipelines, grazing, logging,
canals, ditches, reservoirs or the like, conditions, covenants and other
restrictions, and easements of streets, alleys, highways, pipelines, telephone
lines, power lines, railways and other easements and rights of way on, over or
in respect of any Credit Party’s or Related Partnership’s assets or properties;
(iv) materialmen’s, mechanic’s, repairman’s, employee’s, contractor’s,
sub-contractor’s, operator’s and other Liens incidental to the construction,
maintenance, development or operation of any Credit Party’s or any Related
Partnership’s assets or properties to the extent not delinquent (or which, if
delinquent, are being contested in good faith by appropriate proceedings and
for which such Credit Party or such Related Partnership has set aside on its
books adequate reserves in accordance with Agreement Accounting


 


13

















 


Principles); (v) all contracts, agreements and
instruments, and all defects and irregularities and other matters affecting any
Credit Party’s or any Related Partnership’s assets and properties which were in
existence at the time such Credit Party’s or such Related Partnership’s assets
and properties were originally acquired by a Credit Party or a Related
Partnership and all routine operational agreements entered into in the ordinary
course of business, which contracts, agreements, instruments, defects,
irregularities and other matters and routine operational agreements are not
such as to, individually or in the aggregate, interfere materially with the
operation, value or use of any Credit Party’s or any Related Partnership’s
assets and properties, considered in the aggregate; (vi) Liens in
connection with workmen’s compensation, unemployment insurance or other social
security, old age pension or public liability obligations; (vii) legal or
equitable encumbrances deemed to exist by reason of the existence of any
litigation or other legal proceeding or arising out of a judgment or award with
respect to which an appeal is being prosecuted in good faith;
(viii) rights reserved to or vested in any municipality, governmental,
statutory or other public authority to control or regulate any Credit Party’s
or any Related Partnership’s assets and properties in any manner, and all
applicable laws, rules and orders from any governmental authority; (ix) other
Liens imposed by law, such as carriers’, warehousemen’s and landlord’s liens
and other similar liens arising in the ordinary course of business of a Credit
Party or a Related Partnership which secures payment of obligations not more
than 60 days past due or which are being contested in good faith by appropriate
proceedings and for which adequate reserves shall have been set aside on the
books of such Credit Party or Related Partnership; (x) Liens created by or
pursuant to this Agreement or the Collateral Documents; (xi) Liens
existing at the date of this Agreement which have been disclosed to the Lenders
on Schedule 1.1(d) hereto; and (xii) Liens to secure Vendor Financings;  (xiii) Liens
to secure the Indebtedness permitted pursuant to Sections 7.11(vii); and (xiv)
Liens granted to the Collateral Agent to secure the Indebtedness arising under
the Senior Revolving Credit Documents as provided in, and subject to, the terms
of the Collateral Agency Agreement


 


“Person” means any
natural person, corporation, firm, joint venture, partnership, limited
liability company, association, enterprise, trust or other entity or
organization, or any government or political subdivision or any agency,
department or instrumentality thereof.


 


“Plan” means an employee
pension benefit plan which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code as to which any
Borrower or any member of the Controlled Group may have any liability.


 


“Pledge Agreement” means
those certain Pledge Agreements substantially in the form of Exhibit H
attached hereto (with applicable conforming changes) to be executed by CWEI and
certain of its Subsidiaries pursuant to which such Person shall pledge to
Collateral Agent, for the ratable benefit of the Lenders and the Banks, all of
the issued and outstanding Capital Stock owned by such Person of each
Subsidiary of such Person that is a Guarantor, all partnership interests in the
Related Partnerships (to the extent permitted under the partnership agreement
of such Related Partnerships) and all intercompany Indebtedness held by such
Person, in each case to the extent required by Section 0 to secure the
Obligations, as they may be amended or modified and in effect from time to
time.


 


“Pricing Schedule” means
the Schedule attached hereto identified as such.


 


“Prime Rate” means a rate
per annum equal to the prime rate of interest announced from time to time by
Bank One or its parent (which is not necessarily the lowest rate charged to any
customer), changing when and as said prime rate changes.


 


“Property” of a Person
means any and all property, whether real, personal, tangible, intangible, or
mixed, of such Person, or other assets owned, leased or operated by such Person
including any Oil and Gas Interests.


 


14

















 


“Proved Developed
Nonproducing Present Value” or “PDNP Present Value” means the present value
discounted at ten percent (10%) of future net revenues attributable to all
Proved Nonproducing Oil and Gas Interests set forth in any Qualified Reserve
Report.


 


“Proved Developed
Producing Present Value” or “PDP Present Value” means the present value
discounted at ten percent (10%) of future net revenues attributable to all
Proved Producing Oil and Gas Interests set forth in any Qualified Reserve
Report.


 


“Proved Nonproducing Oil
and Gas Interests” means all Oil and Gas Interests (including Attributed
Interests) which constitute proved developed nonproducing reserves.


 


“Proved Oil and Gas
Interests” means, collectively, Proved Producing Oil and Gas Interests, Proved
Nonproducing Oil and Gas Interests, and Proved Undeveloped Oil and Gas
Interests.


 


“Proved Producing Oil and
Gas Interests” means all Oil and Gas Interests (including Attributed Interests)
which constitute proved developed producing reserves.


 


“Proved Reserves Present
Value” means the sum of the PDP Present Value, the PDNP Present Value and the
PUD Present Value of such Oil and Gas Interests based on a Qualified Reserve
Report; provided, however, in the event the quotient of (i) the PDP
Present Value divided by (ii) the sum of the PDP Present Value, the PDNP
Present Value and PUD Present Value is less than 0.70, then the Proved Reserves
Present Value shall be an amount determined by dividing the PDP Present Value
by 0.70.


 


“Proved Undeveloped Oil
and Gas Interests” means all Oil and Gas Interests (including Attributed
Interests) which constitute proved undeveloped reserves


 


“Proved Undeveloped
Present Value” or “PUD Present Value” means the present value discounted at ten
percent (10%) of future net revenues attributable to Proved Undeveloped Oil and
Gas Interests set forth in any Qualified Reserve Report.


 


“Purchase Money
Indebtedness” means (i) any Indebtedness incurred at the time of or within 30
days prior to or after the acquisition of any fixed assets for the purpose of
financing all or any part of the purchase price thereof, and (ii) any renewals,
extensions or refinancings thereof permitted by this Agreement.


 


“Purchasers” is defined
in Section 0.


 


“Qualified Reserve
Report” means a Reserve Report prepared in accordance with the guidelines
established from time to time by the United States Securities and Exchange
Commission and acceptable to the Administrative Agent, except that, (i) for all
Natural Gas and Crude Oil to be sold from the Evaluated Properties (other than
the Natural Gas and Crude Oil described in clause (ii)), the sales price for
the first five years after the effective date of such report shall be the
equivalent “strip price” for five year swaps  for Natural Gas and Crude
Oil as reflected in the New York Mercantile Exchange as of the settlement of
the last trading day for the contract month coincident with the effective date
of the Reserve Report and thereafter the purchase price shall be fixed at the
sales price in effect at the end of such five year period (in each case as
adjusted for appropriate quality, transportation and location differentials
approved by the Required Lenders); (ii) for all Natural Gas and Crude Oil
to be sold from the Evaluated Properties on a fixed price basis pursuant to any
bona fide contract or with respect to which the price has been hedged pursuant
to any New York Mercantile Exchange contract or bona fide price swap, cap,
floor or collar agreement or any other hedge or derivative arrangement, the
sales price will be the fixed price (as adjusted for appropriate quality,
transportation and location differentials approved by the Required


 


15

















 


Lenders) for the volumes indicated in the contract,
agreement or arrangement; and and (ii) projected operating expenses will
be adjusted to reflect an increase at the rate of 3% per annum beginning on the
first anniversary of the effective date of the Reserve Report.  Each Qualified Reserve Report required to be
delivered by April 1 of each year pursuant to clause (iii) of
Section 0 shall be as of January 1 of such year and shall be prepared by
the Approved Petroleum Engineer.  Each
other Reserve Report shall be prepared by either (i) the Approved
Petroleum Engineer, or (ii) CWEI’s in-house staff and the Qualified
Reserve Report required to be delivered by October 1 of each year shall be
as of July 1 of such year.  Until superseded,
the Existing Reserve Report shall be considered a Qualified Reserve Report.


 


“Rate Management
Obligations” of a Person means any and all obligations of such Person, whether
absolute or contingent and howsoever and whensoever created, arising, evidenced
or acquired (including all renewals, extensions and modifications thereof and
substitutions therefor), under (i) any and all Rate Management
Transactions, and (ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Management Transactions.


 


“Rate Management Transaction”
means any transaction (including an agreement with respect thereto) now
existing or hereafter entered by CWEI or any Subsidiary (including SWR or Blue
Heel and including the SWR Interest Rate Agreements but excluding the SWR Rate
Management Transactions) which is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including any
option with respect to any of these transactions) or any combination thereof,
whether linked to one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures.


 


“Regulation D” means
Regulation D of the Board of Governors of the Federal Reserve System as from
time to time in effect and any successor thereto or other regulation or
official interpretation of said Board of Governors relating to reserve
requirements applicable to member banks of the Federal Reserve System.


 


“Regulation U” means
Regulation U of the Board of Governors of the Federal Reserve System as from
time to time in effect and any successor or other regulation or official
interpretation of said Board of Governors relating to the extension of credit
by banks for the purpose of purchasing or carrying margin stocks applicable to
member banks of the Federal Reserve System.


 


“Related Partnerships”
means the limited partnerships described on Schedule 7.15(vi) of which SWR is
the general partner or managing general partner.


 


“Reportable Event” means
a reportable event as defined in Section 4043 of ERISA and the regulations
issued under such section, with respect to a Plan, excluding, however, such
events as to which the PBGC has by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the occurrence
of such event, provided, however, that a failure to meet the minimum
funding standard of Section 412 of the Code and of Section 302 of
ERISA shall be a Reportable Event regardless of the issuance of any such waiver
of the notice requirement in accordance with either Section 4043(a) of
ERISA or Section 412(d) of the Code.


 


“Reports” is defined in
Section 0.


 


“Required Lenders” means
Lenders in the aggregate having at least sixty-six and two-thirds percent (66
2/3%) of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated,


 


16

















 


Lenders in the aggregate holding at least sixty-six
and two-thirds percent (66 2/3%) of the aggregate unpaid principal amount of
the outstanding Advances.


 


“Reserve Report” means an
unsuperseded engineering analysis of the Borrowing Base Properties (as defined
in the Senior Revolving Credit Agreement as it existed on the Closing Date
without giving effect to any deletion, amendment or restatement of such definition),
in form and substance reasonably acceptable to the Administrative Agent,
prepared in accordance with customary and prudent practices in the petroleum
engineering industry and Financial Accounting Standards Board Statement 69.  Each Reserve Report required to be delivered
by April 1 of each year pursuant to Section 0 shall be as of January 1 of
such year and shall be prepared by the Approved Petroleum Engineer.  Each other Reserve Report shall be prepared at
CWEI’s option by either (i) the Approved Petroleum Engineer, or
(ii) CWEI’s in-house staff and the Reserve Report required to be delivered
by October 1 of each year shall be as of July 1 of such year.


 


“Reserve Requirement”
means, with respect to an Interest Period, the maximum aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves) which is
imposed under Regulation D on eurocurrency liabilities.


 


“Risk-Based Capital
Guidelines” is defined in Section 0.


 


“Romere” means Romere
Pass Acquisition L.L.C., a Delaware limited liability company, and its
successors and assigns.


 


“Romere Corp” means CWEI
Romere Pass Acquisition Corp., a Delaware corporation, and its successors and
assigns.


 


“S&P” means Standard
and Poor’s Ratings Services, a division of The McGraw Hill Companies, Inc.


 


“Sale and Leaseback
Transaction” means any sale or other transfer of Property by any Person with
the intent to lease such Property as lessee.


 


“Schedule” refers to a
specific schedule to this Agreement, unless another document is specifically
referenced.


 


“Section” means a
numbered section of this Agreement, unless another document is specifically
referenced.


 


“Senior Revolving Agent”
means Bank One, NA, in its capacity as the Administrative Agent for Banks under
the Senior Revolving Credit Agreement or any permitted successor thereto in
such capacity.


 


“Senior Revolving Credit
Agreement” means that certain Amended and Restated Credit Agreement dated as of
May 21, 2004 among the Borrowers, the Guarantors, the Senior Revolving Agent
and the Banks pursuant to which the Banks therein agree to make a $300,000,000
revolving loan available to the Borrowers, as amended, modified, supplemented
or restated as permitted hereunder.


 


“Senior Revolving Credit
Documents” means, collectively, the Senior Revolving Credit Agreement, and any
other agreements, documents, instruments or certificates executed and delivered
from time to time in connection therewith.


 


17

















 


“Senior Revolving Notes”
means the notes, if any, issued pursuant to the Senior Revolving Credit
Agreement, as amended, modified, supplemented or restated from time to time in
compliance herewith.


 


“Single Employer Plan”
means a Plan maintained by any Borrower or any member of the Controlled Group
for employees of such Borrower or such member of the Controlled Group.


 


“Southwest Partners”
means Southwest Partners, L.P., a Delaware limited partnership, and its
successors and assigns.


 


“Stated Rate” is defined
in Section 0.


 


“Subsidiary” of a Person
means (i) any corporation more than 50% of the outstanding securities
having ordinary voting power of which shall at the time be owned or controlled,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries, or (ii) any
partnership, limited liability company, association, joint venture or similar
business organization more than 50% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled.  Unless otherwise expressly provided, all
references herein to a “Subsidiary” shall mean a Subsidiary of CWEI.


 


“Substantial Portion”
means, with respect to the Property of CWEI and its Subsidiaries, Property
which represents more than 10% of the consolidated assets of CWEI and its
Subsidiaries or property which is responsible for more than 10% of the
consolidated net sales, in each case, as would be shown in the consolidated
financial statements of CWEI and its Subsidiaries as at the beginning of the
twelve-month period ending with the month in which such determination is made
(or if financial statements have not been delivered hereunder for that month
which begins the twelve-month period, then the financial statements delivered
hereunder for the quarter ending immediately prior to that month).


 


“SWR” means Southwest
Royalties, Inc., a Delaware corporation, and its successors and assigns.


 


“SWR Acquisition” means
the acquisition of SWR pursuant to the SWR Merger Agreement.


 


“SWR Acquisition
Documents” means the SWR Merger Agreement, the Certificate of Merger and all
other certificates and other documents and instruments now or hereafter
executed and delivered by, between or among CWEI, Merger Sub and SWR pursuant
to the SWR Merger Agreement or in connection with the SWR Acquisition.


 


“SWR Hedge Assumption
Agreement” means an Assignment and Assumption Agreement by and among the
Administrative Agent and Macquarie in substantially the form of Exhibit I and
pursuant to which the Administrative Agent assumes the SWR Rate Management
Obligations, as it may be amended or modified and in effect from time to time.


 


“SWR Interest Rate
Agreements” means those certain Rate Management Transactions consisting of rate
swaps entered into by SWR prior to the SWR Merger and described on Schedule
1.1(c).


 


“SWR Interests” means,
collectively, the “Ownership Interests” as such term is defined in the SWR
Merger Agreement, including the Attributed Interests.


 


“SWR Merger” means the
merger of Merger Sub with and into SWR pursuant to the SWR Merger Agreement.


 


18

















 


“SWR Merger Agreement”
means that certain Agreement and Plan of Merger dated as of May 3, 2004 by and
among CWEI, Merger Sub and SWR as amended or modified.


 


“SWR Rate Management Obligations”
means all Rate Management Obligations of SWR with respect to the SWR Rate
Management Transactions.


 


“SWR Rate Management
Transactions” means those certain Rate Management Transactions consisting of
commodity swaps entered into by SWR prior to the SWR Merger and described on
Schedule 1.1(b).


 


“SWR Reserve Report”
means the reserve report effective as of January 1, 2004, covering the SWR
Interests and prepared by Ryder Scott Company, L.P., SWR’s independent
petroleum engineering firm, as set forth in the data books provided to CWEI on
or about March 30, 2004.


 


“Taxes” means any and all
present or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and any and all liabilities with respect to the foregoing, but excluding
Excluded Taxes and Other Taxes.


 


“Terminated Lender” is
defined in Section 2.20.


 


“Tex-Hal” means Tex-Hal
Partners, Inc., a Delaware corporation, and its successors and assigns.


 


“Transferee” is defined
in Section 0.


 


“Type” means, with
respect to any Advance, its nature as a Floating Rate Advance or a Eurodollar
Advance and with respect to any Loan, its nature as a Floating Rate Loan or a
Eurodollar Loan.


 


“Unfunded Liabilities”
means the amount (if any) by which the present value of all vested and unvested
accrued benefits under all Single Employer Plans exceeds the fair market value
of all such Plan assets allocable to such benefits, all determined as of then
most recent valuation date for such Plans using PBGC actuarial assumptions for
single employer plan terminations.


 


“Unmatured Default” means
an event which but for the lapse of time or the giving of notice, or both,
would constitute a Default.


 


“Unsecured Notes” means
the 10 1/2% Senior Notes due 2004, issued by SWR pursuant to the Indenture
dated as of October 15, 1997, as amended, modified or supplemented from time to
time.


 


“Vendor Financings” means
(i) non-recourse vendor financings incurred by CWEI or its Subsidiaries
for services, equipment or material on other than customary trade payable terms
not exceeding $10,000,000 in the aggregate at any one time outstanding
(calculated based upon the invoice amount for such services, equipment or
material), or (ii) recourse vendor financings of a like nature not
exceeding $6,000,000 in the aggregate at any one time outstanding incurred by
CWEI or its Subsidiaries for the first six (6) wells to be drilled pursuant to
that certain CWEI South Louisiana Vendor Financing Agreement dated as of
May 15, 2002 among CWEI, Parker USA Drilling Company, et al.


 


“Warrior” means Warrior
Gas Co., a Texas corporation, and its successors and assigns.


 


“Wholly-Owned Subsidiary”
of a Person means (i) any Subsidiary all of the outstanding voting
securities of which shall at the time be owned or controlled, directly or
indirectly, by such Person or one


 


19

















 


or more Wholly-Owned Subsidiaries of such Person, or
by such Person and one or more Wholly-Owned Subsidiaries of such Person, or
(ii) any partnership, limited liability company, association, joint
venture or similar business organization 100% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.


 


“Williams Group” means
Clayton Williams, Jr., his spouse and descendants (whether natural or adopted)
and any trust, family limited partnership, or other entity solely for the
benefit of Clayton Williams, Jr., his spouse or such descendants.


 


The foregoing definitions
shall be equally applicable to both the singular and plural forms of the
defined terms.  The use herein of the
word “include” or “including”, when following any general statement, term or
matter, shall not be construed to limit such statement, term or matter to the
specific items or matters set forth immediately following such word or to
similar items or matters, whether or not nonlimiting language (such as “without
limitation” or “but not limited to” or words of similar import) is used with
reference thereto, but rather shall be deemed to refer to all other items or
matters that fall within the broadest possible scope of such general statement,
term or matter.


 


As used herein, the terms
“proved reserves,” “proved developed reserves,” “proved developed producing
reserves,” “proved developed nonproducing reserves,” and “proved undeveloped
reserves” have the meaning given such terms from time to time and at the time
in question by the Society of Petroleum Engineers of the American Institute of
Mining Engineers.


 


THE CREDITS


 


Commitment.  Each Lender severally agrees, on the terms and
conditions set forth in this Agreement, to make, on the date of this Agreement,
Loans to the Borrowers in an amount equal to the amount of its Commitment.  The Borrowers may make only one borrowing
under the Commitments which shall be on the date of the initial Advance.  Any amount borrowed under the Commitments
and subsequently repaid or prepaid may not be reborrowed.  Subject to Section 0, clause (ii)
of Section 0, and Section 0, all amounts owed hereunder with respect
to the Loans shall be paid in full on the Facility Termination Date.  Each Lender’s Commitment shall terminate
immediately and without further action on the date of the initial Advance after
giving effect to the funding of such Lender’s Commitment on such date.


 


Required Payments; Termination.  In addition to any payments required under clause (ii) of
Section 0 and Section 0, any outstanding Advances and all other
unpaid Obligations shall be paid in full by the Borrowers on the Facility Termination
Date.


 


Ratable Loans.  Each Advance hereunder shall consist of
Loans made from the several Lenders ratably in proportion to the ratio that
their respective Commitments bear to the Aggregate Commitment.


 


Types of Advances.  Any Advance may be a Eurodollar Advance or a Floating Rate
Advance, or a combination thereof, as selected by the Borrower Representative
in accordance with Sections 0 and 0.


 


Minimum Amount of Each
Advance.  The initial Advance shall be in the amount
of the aggregate Commitment and thereafter each Eurodollar Advance shall be in
the minimum amount of $250,000 (and in multiples of $250,000 if in excess
thereof), and each Floating Rate Advance shall be in the minimum amount of
$100,000 and in multiples of $100,000 if in excess thereof.


 


20

















 


Prepayments.


 


Optional Principal Payments.  The Borrowers may from time to time pay, subject to the payment
of the premium described in this Section 0, all outstanding Floating Rate
Advances, or, in a minimum aggregate amount of $100,000 or any integral
multiple of $100,000 in excess thereof, any portion of the outstanding Floating
Rate Advances upon two Business Days’ prior notice to the Agent.  The Borrowers may from time to time pay,
subject to the payment of any funding indemnification amounts required by
Section 0 and the premium set forth in this Section 0, all of the
outstanding Eurodollar Advances, or, in a minimum aggregate amount of $250,000
or any integral multiple of $250,000 in excess thereof, any portion of the
outstanding Eurodollar Advances, upon three (3) Business Days’ prior notice to
the Administrative Agent.  The Borrowers
shall pay to Agent (in addition to the accrued interest on the principal amount
being prepaid), for the benefit of the Lenders, as liquidated damages for the
loss of the bargain and not as a penalty an amount equal to one percent (1%) of
the amount of any outstanding Advances prepaid during the period from the date
hereof until and including the first anniversary of the Closing Date.  Notwithstanding the foregoing, no premium
shall be payable with respect to prepayments of outstanding Advances made on or
before ninety (90) days after the Closing Date in an aggregate amount up to the
amount necessary to reduce the aggregate outstanding principal amount of the
Advances to $40,000,000; provided that such prepayment is made with
the proceeds of a Capital Markets Event. 
For the avoidance of doubt, the premium set forth in this Section 0
shall be due and payable with respect to that portion of all prepayments of principal
made within ninety (90) days of the Closing Date that result in the aggregate
outstanding principal amount of all Advances being less than $40,000,000,
regardless of whether such prepayments are made with the proceeds of a Capital
Markets Event.


 


Mandatory Prepayment.  Upon the occurrence of a Capital Markets Event, the Borrowers
shall make a mandatory prepayment of the Loans in an amount equal to the lesser
of (i) Capital Market Net Proceeds, and (ii) $35,000,000.  If immediately after giving effect to the
prepayment required by the preceding sentence the aggregate outstanding
principal amount of all Advances is less than $40,000,000, the amount of such
prepayment equal to the difference between $40,000,000 and the aggregate
outstanding principal amount of all Advances after giving effect to such
prepayment shall be an optional principal prepayment subject to the payment of
the premium set forth in Section 0.  In
addition to the foregoing, the Borrowers shall make a mandatory prepayment with
the proceeds of any asset sales to the extent required by Section 0 and the
premium set forth in Section 0 shall be due and payable with respect to such
principal prepayments as if such principal prepayments were optional principal
prepayments.


 


Method of Selecting Interest
Periods for Advances.  The Borrower Representative shall select the
Type of Advance and, in the case of each Eurodollar Advance, the Interest
Period applicable thereto from time to time. 
The Borrower Representative shall give the Administrative Agent
irrevocable notice (a “Borrowing Notice”) not later than 11:00 a.m. (Chicago,
Illinois time) on the Borrowing Date of each Floating Rate Advance and three
(3) Business Days before the Borrowing Date for each Eurodollar Advance (except
that, in respect of the initial Advance, not later than 11:00 a.m. on the
Closing Date), specifying:


 


the Borrowing Date, which shall be a Business Day, of such Advance,


 


the aggregate amount of such Advance,


 


the Type of Advance selected, and


 


21

















 


in the case of each Eurodollar Advance, the Interest Period applicable
thereto; provided, that the Borrowers shall not be permitted to have
outstanding at any one time more than one Eurodollar Advance and during the
first sixty (60) days after the Closing Date the Interest Period with respect
to such Eurodollar Advance shall be a one month Interest Period.


 


Not later than
3:00 p.m. (Chicago, Illinois time) on the initial Borrowing Date, each Lender
shall make available its Loan or Loans in funds immediately available in
Chicago, Illinois to the Administrative Agent at its address specified pursuant
to Article XIV.  The Administrative
Agent will make the funds so received from the Lenders available to the
Borrowers at the Administrative Agent’s aforesaid address.


 


Continuation of Outstanding
Advances.  Floating Rate Advances shall continue as
Floating Rate Advances unless and until such Floating Rate Advances are
converted into Eurodollar Advances pursuant to this Section 0 or are
repaid in accordance with Section 0. 
Each Eurodollar Advance shall continue as a Eurodollar Advance until the
end of then applicable Interest Period therefor, at which time such Eurodollar
Advance shall be automatically converted into a Floating Rate Advance unless
(x) such Eurodollar Advance is or was repaid in accordance with Section 0
or (y) the Borrower Representative shall have given the Administrative Agent a
Conversion/Continuation Notice (as defined below) requesting that, at the end
of such Interest Period, such Eurodollar Advance continue as a Eurodollar
Advance for the same or another Interest Period or convert into a Floating Rate
Advance; provided, that the Borrowers shall not be permitted to have
outstanding at any one time more than one Eurodollar Advance.  Subject to the terms of Section 0, the
Borrower Representative may elect from time to time to convert all or any part
of a Floating Rate Advance into a Eurodollar Advance.  The Borrower Representative shall give the Administrative Agent
irrevocable notice (a “Conversion/Continuation Notice”) of each conversion of a
Floating Rate Advance into a Eurodollar Advance or continuation of a Eurodollar
Advance not later than 10:00 a.m. (Chicago, Illinois time) at least three
Business Days prior to the date of the requested conversion or continuation,
specifying:


 


the requested date, which shall be a Business Day, of such conversion
or continuation,


 


the aggregate amount and Type of the Advance which is to be converted
or continued, and


 


the amount of such Advance which is to be converted into or continued
as a Floating Rate Advance or a Eurodollar Advance, as the case may be, and,
with respect to each Eurodollar Advance, the duration of the Interest Period
applicable thereto.


 


Changes in Interest Rate,
etc.  Each Floating Rate Advance shall bear interest on the outstanding
principal balance thereof, for each day from and including the date of such
Advance is made or is automatically converted from a Eurodollar Advance into a
Floating Rate Advance pursuant to Section 0, to but excluding the date it
is paid or is converted into a Eurodollar Advance pursuant to Section 0
hereof, at a rate per annum equal to the Floating Rate for such day.  Changes in the rate of interest on that
portion of any Advance maintained as a Floating Rate Advance will take effect
simultaneously with each change in the Alternate Base Rate.  Each Eurodollar Advance shall bear interest
on the outstanding principal amount thereof from and including the first day of
the Interest Period applicable thereto to (but not including) the last day of
such Interest Period at the interest rate determined by the Administrative
Agent as applicable to such Eurodollar Advance based upon the Borrower
Representative’s selections under Sections 0 and 0 and otherwise in accordance
with the terms hereof.  No Interest
Period may end after the Facility Termination Date.


 


22

















 


Rates Applicable After
Default.  Notwithstanding anything to the contrary
contained in Section 0, 0 or 0, during the continuance of a Default the
Required Lenders may, at their option, by notice to the Borrowers (which notice
may be revoked at the option of the Required Lenders notwithstanding any
provision of Section 0 requiring unanimous consent of the Lenders to
changes in interest rates), declare that no Advance may be made as, converted
into or continued as a Eurodollar Advance. 
During the continuance of a Default, the Required Lenders may, at their
option, by notice to the Borrowers (which notice may be revoked at the option
of the Required Lenders notwithstanding any provision of Section 0
requiring unanimous consent of the Lenders to changes in interest rates),
declare that (i) each Eurodollar Advance shall bear interest for the remainder
of the applicable Interest Period at the rate otherwise applicable to such
Interest Period plus 2% per annum and (ii) each Floating Rate Advance
shall bear interest at a rate per annum equal to the Floating Rate in effect
from time to time plus 2% per annum, provided
that, during the continuance of a Default under Section 0 or 0, the
interest rates set forth in clauses (i) and (ii) above shall be applicable to
all Advances without any election or action on the part of the Administrative
Agent or any Lender.


 


Method of Payment.  All payments of the Obligations hereunder shall be made, without
setoff, deduction, or counterclaim, in immediately available funds to the
Administrative Agent at the Administrative Agent’s address specified pursuant
to Article XIV, or at any other Lending Installation of the Administrative
Agent specified in writing by the Administrative Agent to the Borrower
Representative, by noon (Chicago, Illinois time) on the date when due and shall
be applied ratably by the Administrative Agent among the Lenders.  Each payment delivered to the Administrative
Agent for the account of any Lender shall be delivered promptly by the
Administrative Agent to such Lender in the same type of funds that the
Administrative Agent received at its address specified pursuant to Article XIV
or at any Lending Installation specified in a notice received by the
Administrative Agent from such Lender.


 


Noteless Agreement; Evidence
of Indebtedness.  Each Lender shall maintain in accordance
with its usual practice an account or accounts evidencing the indebtedness of
the Borrowers to such Lender resulting from each Loan made by such Lender from
time to time, including the amounts of principal and interest payable and paid
to such Lender from time to time hereunder.


 


Administrative Agent shall also maintain accounts in which it will
record (a) the amount of each Loan made hereunder, the Type thereof and the
Interest Period with respect thereto, (b) the amount of any principal or
interest due and payable or to become due and payable from the Borrowers to
each Lender hereunder and (c) the amount of any sum received by the
Administrative Agent hereunder from the Borrowers and each Lender’s share
thereof.


 


The entries maintained in the accounts maintained pursuant to
paragraphs (i) and (ii) above shall be prima facie evidence of the existence and
amounts of the Obligations therein recorded; provided, however, that the
failure of the Administrative Agent or any Lender to maintain such accounts or
any error therein shall not in any manner affect the obligation of the
Borrowers to repay the Obligations in accordance with their terms.


 


Any Lender may request that its Loans be evidenced by a promissory note
in substantially the form of Exhibit E (a “Note”).  In such event, the Administrative Agent shall prepare, and the
Borrowers shall execute and deliver to such Lender such Note payable to the
order of such Lender.  Thereafter, the
Loans evidenced by such Note and interest thereon shall at all times (prior to
any assignment pursuant to Section 0) be represented by one or more Notes
payable to the order of the payee named therein, except to the extent that any
such Lender subsequently returns any such Note for cancellation and


 


23

















 


requests
that such Loans once again be evidenced as described in paragraphs (i) and (ii)
above.


 


Telephonic Notices.  Each Borrower hereby authorizes the Lenders and the
Administrative Agent to extend, convert or continue Advances, effect selections
of Types of Advances and to transfer funds based on telephonic notices made by
any person or persons the Administrative Agent or any Lender in good faith
believes to be acting on behalf of the Borrower Representative or the
Borrowers, it being understood that the foregoing authorization is specifically
intended to allow Conversion/Continuation Notices to be given
telephonically.  The Borrower
Representative agrees to deliver promptly to the Administrative Agent a written
confirmation of each telephonic notice signed by an Authorized Officer.  If the written confirmation differs in any
material respect from the action taken by the Administrative Agent and the
Lenders, the records of the Administrative Agent and the Lenders shall govern
absent manifest error.


 


Interest Payment Dates;
Interest and Fee Basis.  Interest accrued on each Floating Rate
Advance shall be payable on each Payment Date, commencing with the first such
date to occur after the date hereof, on any date on which the Floating Rate
Advance is prepaid, whether due to acceleration or otherwise, and at
maturity.  Interest accrued on that
portion of the outstanding principal amount of any Floating Rate Advance
converted into a Eurodollar Advance on a day other than a Payment Date shall be
payable on the date of conversion. 
Interest accrued on each Eurodollar Advance shall be payable on the last
day of its applicable Interest Period, on any date on which the Eurodollar
Advance is prepaid, whether by acceleration or otherwise, and at maturity.  Interest accrued on each Eurodollar Advance
having an Interest Period longer than three months shall also be payable on the
last day of each three-month interval during such Interest Period.  Interest on all Advances shall be calculated
for actual days elapsed on the basis of a 360-day year.  Interest shall be payable for the day an
Advance is made but not for the day of any payment on the amount paid if
payment is received prior to noon (Chicago, Illinois time) at the place of
payment.  If any payment of principal of
or interest on an Advance shall become due on a day which is not a Business
Day, such payment shall be made on the next succeeding Business Day and, in the
case of a principal payment, such extension of time shall be included in
computing interest in connection with such payment.


 


Notification of Advances,
Interest Rates, Prepayments and Commitment Reductions.  Promptly after receipt thereof, the Administrative Agent will
notify each Lender of the contents of each Conversion/Continuation Notice and
repayment notice received by it hereunder. 
The Administrative Agent will notify each Lender of the interest rate
applicable to each Eurodollar Advance promptly upon determination of such
interest rate and at any time a Floating Rate Advance is outstanding, will give
each Lender prompt notice of each change in the Alternate Base Rate.


 


Lending Installations.  Subject to Section 0, each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time.  All
terms of this Agreement shall apply to any such Lending Installation and the
Loans and any Notes issued hereunder shall be deemed held by each Lender for
the benefit of any such Lending Installation. 
Each Lender may, by written notice to the Administrative Agent and the
Borrower Representative in accordance with Article XIV, designate replacement
or additional Lending Installations through which Loans will be made by it and
for whose account Loan payments are to be made.


 


Non-Receipt of Funds by the
Administrative Agent.  Unless any Borrower or a Lender, as the case
may be, notifies the Administrative Agent prior to the date on which it is
scheduled to make payment to the Administrative Agent of (i) in the case
of a Lender, the proceeds of a Loan or (ii) in the case of such Borrower,
a payment of principal, interest or fees to the Administrative Agent for the
account of the Lenders, that it does not intend to make such payment, the
Administrative Agent may assume that such


 


24

















 


payment has been made.  The
Administrative Agent may, but shall not be obligated to, make the amount of
such payment available to the intended recipient in reliance upon such
assumption.  If such Lender or any
Borrower, as the case may be, has not in fact made such payment to the
Administrative Agent, the recipient of such payment shall, on demand by the
Administrative Agent, repay to the Administrative Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to (x) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day for the first three days and,
thereafter, the interest rate applicable to the relevant Loan or (y) in the
case of payment by any Borrower, the interest rate applicable to the relevant
Loan.


 


Joint and Several Liability.  The Obligations shall constitute one joint and several direct and
general obligation of the Borrowers. 
Notwithstanding anything to the contrary contained herein, each of the
Borrowers shall be jointly and severally, with each other Borrower, directly
and unconditionally liable to the Administrative Agent and the Lenders for all
Obligations and shall have the obligations of co-maker with respect to the
Loans, the Notes, and the other Obligations, it being agreed that the advances
to each Borrower inure to the benefit of all Borrowers, and that the
Administrative Agent and the Lenders are relying on such joint and several
liability of the Borrowers as co-makers in extending the Loans hereunder.


 


Borrower Representative.  Each Borrower hereby appoints the Borrower Representative as its
representative, hereunder, for all purposes, including for the purpose of
requesting Advances and receiving account statements and other notices and
communications to the Borrowers (or any of them) from any Agent or any Lender.  Each Agent and the Lenders may rely, and
shall be fully protected in relying, on any request for borrowing, disbursement
instruction, report, information or any other notice or communication made or
given by such Person, whether in its own name, on behalf of any other Borrower
or on behalf of “the Borrowers,” and no Agent nor any Lender shall have any
obligation to make any inquiry or request any confirmation from or on behalf of
any other Borrower as to the binding effect on it of any such request,
instruction, report, information, notice or communication, nor shall the joint
and several character of the Borrowers’ liability for the Obligations be
affected.  Each Agent and each Lender
intend to maintain a single loan account in the name of “Clayton Williams
Energy, Inc.” hereunder and each Borrower expressly agrees to such arrangement
and confirms that such arrangement shall have no effect on the joint and
several character of its liability for the Obligations.


 


Replacement of Lender.  In the event that (i) any Borrower is required pursuant to
Section 0, 0 or 0 to make any additional payment to any Lender or if any
Lender’s obligation to make or continue, or to convert Floating Rate Advances
into, Eurodollar Advances shall be suspended pursuant to Section 0 (any
Lender so affected an “Affected Lender”), or (ii) in connection with any
proposed amendment, modification, termination, waiver or consent with respect
to any of the provisions of this Agreement or any other Loan Document as
contemplated by Section 0, the consent of Required Lenders shall have been
obtained but the consent of one or more of such other Lenders (each a
“Non-Consenting Lender”) whose consent is required has not been obtained; then,
the Borrowers may elect to replace such Affected Lender or Non-Consenting
Lender (a “Terminated Lender”) as a Lender party to this Agreement, provided that, with respect to the
replacement of an Affected Lender, no Default or Unmatured Default shall have
occurred and be continuing at the time of such replacement, and provided further that, concurrently with
the replacement of any Terminated Lender, (x) another bank or other entity
which is reasonably satisfactory to the Administrative Agent shall agree, as of
such date, to purchase for cash the Advances and other Obligations due to the
Terminated Lender pursuant to an assignment substantially in the form of
Exhibit C and to become a Lender for all purposes under this Agreement and to
assume all obligations of the Terminated Lender to be terminated as of such
date and to comply with the requirements of Section 0 applicable to
assignments, and (y) the Borrowers shall pay to such Terminated


 


25

















 


Lender in same day funds on the day of such replacement (A) all amounts
that are due to such Terminated Lender pursuant to Sections 0, 0 and 0, and (B)
an amount, if any, equal to the payment which would have been due to such
Lender on the day of such replacement under Section 0 had the Loans of
such Terminated Lender been prepaid on such date rather than sold to the
replacement Lender.  The Lenders agree
that a Terminated Lender will not be entitled to receive liquidated damages
pursuant to Section 0 as a result of its assignment under this Section 0.


 


Limitation of Interest.  The Borrowers, the Administrative Agent and the Lenders intend to
strictly comply with all applicable laws, including applicable usury laws.  Accordingly, the provisions of this
Section 0 shall govern and control over every other provision of this
Agreement or any other Loan Document which conflicts or is inconsistent with
this Section 0, even if such provision declares that it controls.  As used in this Section 0, the term
“interest” includes the aggregate of all charges, fees, benefits or other
compensation which constitute interest under applicable law, provided that, to the maximum extent
permitted by applicable law, (a) any non-principal payment shall be
characterized as an expense or as compensation for something other than the
use, forbearance or detention of money and not as interest, and (b) all
interest at any time contracted for, reserved, charged or received shall be
amortized, prorated, allocated and spread, in equal parts during the full term
of the Obligations.  In no event shall
any Borrower or any other Person be obligated to pay, or any Lender have any
right or privilege to reserve, receive or retain, (a) any interest in excess of
the maximum amount of nonusurious interest permitted under the laws of the
State of Texas or the applicable laws (if any) of the United States or of any
other applicable state, or (b) total interest in excess of the amount which
such Lender could lawfully have contracted for, reserved, received, retained or
charged had the interest been calculated for the full term of the Obligations
at the Highest Lawful Rate.  On each
day, if any, that the interest rate (the “Stated Rate”) called for under this
Agreement or any other Loan Document exceeds the Highest Lawful Rate, the rate
at which interest shall accrue shall automatically be fixed by operation of
this sentence at the Highest Lawful Rate for that day, and shall remain fixed
at the Highest Lawful Rate for each day thereafter until the total amount of
interest accrued equals the total amount of interest which would have accrued if
there were no such ceiling rate as is imposed by this sentence.  Thereafter, interest shall accrue at the
Stated Rate unless and until the Stated Rate again exceeds the Highest Lawful
Rate when the provisions of the immediately preceding sentence shall again
automatically operate to limit the interest accrual rate.  The daily interest rates to be used in
calculating interest at the Highest Lawful Rate shall be determined by dividing
the applicable Highest Lawful Rate per annum by the number of days in the calendar
year for which such calculation is being made. 
None of the terms and provisions contained in this Agreement or in any
other Loan Document which directly or indirectly relate to interest shall ever
be construed without reference to this Section 0, or be construed to
create a contract to pay for the use, forbearance or detention of money at an
interest rate in excess of the Highest Lawful Rate.  If the term of any Obligation is shortened by reason of acceleration
of maturity as a result of any Default or by any other cause, or by reason of
any required or permitted prepayment, and if for that (or any other) reason any
Lender at any time, including but not limited to, the stated maturity, is owed
or received (and/or has received) interest in excess of interest calculated at
the Highest Lawful Rate, then and in any such event all of any such excess
interest shall be canceled automatically as of the date of such acceleration,
prepayment or other event which produces the excess, and, if such excess interest
has been paid to such Lender, it shall be credited pro tanto against then-outstanding principal balance of the
Borrowers’ obligations to such Lender, effective as of the date or dates when
the event occurs which causes it to be excess interest, until such excess is
exhausted or all of such principal has been fully paid and satisfied, whichever
occurs first, and any remaining balance of such excess shall be promptly
refunded to its payor.  Chapter 346 of
the Texas Finance Code (which regulates certain revolving credit accounts
(formerly Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15)) shall not apply to this
Agreement or to any Loan, nor shall this Agreement or any Loan be governed by
or be subject to the provisions of such Chapter 346 in any manner whatsoever.


 


26

















 


Subordination of Other
Obligations of the Credit Parties.  Any Indebtedness of any Credit Party now or hereafter held by any
other Credit Party is hereby subordinated in right of payment to the prior payment
in full in cash of the Obligations, provided prior to a Default, each Credit
Party holding such Indebtedness may receive ordinary course or regularly
scheduled payments of such Indebtedness. 
Any such Indebtedness of any Credit Party to any other Credit Party
collected or received by such Credit Party after a Default has occurred and is
continuing shall be held in trust for the Lenders and shall forthwith be paid
over to the Administrative Agent for the benefit of the Lenders to be credited
and applied against the Obligations but without affecting, impairing or
limiting in any manner the liability of any Credit Party under any other
provision of this Agreement or any Guaranty.


 


YIELD PROTECTION; TAXES


 


Yield Protection.  If, on or after the date of this Agreement, the adoption of any
law or any governmental or quasi-governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any change
in the interpretation or administration thereof by any governmental or
quasi-governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Lender or
applicable Lending Installation with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency:


 


subjects any Lender or any applicable Lending Installation to any
Taxes, or changes the basis of taxation of payments (other than with respect to
Excluded Taxes) to any Lender in respect of its Loans, or


 


imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Lender or any
applicable Lending Installation (other than reserves and assessments taken into
account in determining the interest rate applicable to Eurodollar Advances), or


 


imposes any other condition the result of which is to increase the cost
to any Lender or any applicable Lending Installation of making, funding or
maintaining its Eurodollar Loans or reduces any amount receivable by any Lender
or any applicable Lending Installation in connection with its Eurodollar Loans
or requires any Lender or any applicable Lending Installation to make any
payment calculated by reference to the amount of Eurodollar Loans held or
interest received by it, by an amount deemed material by such Lender,


 


and the result
of any of the foregoing is to increase the cost to such Lender or applicable
Lending Installation of making or maintaining its Loans or Commitment or to
reduce the return received by such Lender or applicable Lending Installation in
connection with such Eurodollar Loans or Commitment, then, within 15 days of
demand by such Lender, the Borrowers shall pay such Lender such additional
amount or amounts as will compensate such Lender for such increased cost or
reduction in amount received.


 


Changes in Capital Adequacy
Regulations.  If a Lender determines the amount of capital
required or expected to be maintained by such Lender, any Lending Installation
of such Lender or any corporation controlling such Lender is increased as a
result of a Change, then, within 15 days of demand by such Lender, the
Borrowers shall pay such Lender the amount necessary to compensate for any
shortfall in the


 


27

















 


rate of return on the portion of such increased capital which such
Lender determines is attributable to this Agreement, its Loans or its
Commitment to make Loans hereunder (after taking into account such Lender’s
policies as to capital adequacy). 
“Change” means (i) any change after the date of this Agreement in
the Risk-Based Capital Guidelines or (ii) any adoption of or change in any
other law, governmental or quasi-governmental rule, regulation, policy,
guideline, interpretation, or directive (whether or not having the force of
law) after the date of this Agreement which affects the amount of capital
required or expected to be maintained by any Lender or any Lending Installation
or any corporation controlling any Lender. 
“Risk-Based Capital Guidelines” means (i) the risk-based capital
guidelines in effect in the United States on the date of this Agreement,
including transition rules, and (ii) the corresponding capital regulations
promulgated by regulatory authorities outside the United States implementing
the July 1988 report of the Basle Committee on Banking Regulation and
Supervisory Practices Entitled “International Convergence of Capital
Measurements and Capital Standards,” including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.


 


Availability of Types of
Advances.  If any Lender determines that maintenance of
its Eurodollar Loans at a suitable Lending Installation would violate any
applicable law, rule, regulation, or directive, whether or not having the force
of law, or if the Required Lenders determine that (i) deposits of a type
and maturity appropriate to match fund Eurodollar Advances are not available or
(ii) the interest rate applicable to Eurodollar Advances does not
accurately reflect the cost of making or maintaining Eurodollar Advances, then
the Administrative Agent shall suspend the availability of Eurodollar Advances
and require any affected Eurodollar Advances to be repaid or converted to
Floating Rate Advances, subject to the payment of any funding indemnification
amounts required by Section 0.


 


Funding Indemnification.  If any payment of a Eurodollar Advance occurs on a date which is
not the last day of the applicable Interest Period, whether because of
acceleration, prepayment or otherwise, or a Eurodollar Advance is not made on
the date specified by the Borrower Representative for any reason other than
default by the Lenders, the Borrowers will indemnify each Lender for any loss
or cost incurred by it resulting therefrom, including, without limitation, any
loss or cost in liquidating or employing deposits acquired to fund or maintain
such Eurodollar Advance.


 


Taxes.  (i) All payments by the Borrowers to or
for the account of any Lender or the Administrative Agent hereunder or under
any Note shall be made free and clear of and without deduction for any and all
Taxes.  If any Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender or the Administrative Agent, (a) the sum payable shall
be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section 0) such Lender or the Administrative Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (b) the Borrowers shall make such deductions, (c)
the Borrowers shall pay the full amount deducted to the relevant authority in
accordance with applicable law and (d) the Borrowers shall furnish to the
Administrative Agent the original copy of a receipt evidencing payment thereof
within 30 days after such payment is made.


 


In addition, the Borrowers hereby agree to pay any present or future
stamp or documentary taxes and any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under any Note or
from the execution or delivery of, or otherwise with respect to, this Agreement
or any Note (“Other Taxes”).


 


Borrowers hereby agree to indemnify the Administrative Agent and each
Lender for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed on amounts payable under this
Section 0) paid by the Administrative Agent or such Lender as a result of
its Commitment, any Loans made by it hereunder, or


 


28

















 


otherwise
in connection with its participation in this Agreement and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto.  Payments due under this
indemnification shall be made within 30 days of the date the Administrative
Agent or such Lender makes demand therefor pursuant to Section 0.


 


Each Lender that is not incorporated under the laws of the United
States of America or a state thereof (each a “Non-U.S. Lender”) agrees that it
will, not more than ten Business Days after the date of this Agreement,
(i) deliver to the Administrative Agent two duly completed copies of
United States Internal Revenue Service Form W-8BEN or W-8ECI, certifying in
either case that such Lender is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal income
taxes, and (ii) deliver to the Administrative Agent a United States
Internal Revenue Form W-8 or W-9, as the case may be, and certify that it is
entitled to an exemption from United States backup withholding tax.  Each Non-U.S. Lender further undertakes to
deliver to each of the Borrower Representative and the Administrative Agent (x)
renewals or additional copies of such form (or any successor form) on or before
the date that such form expires or becomes obsolete, and (y) after the
occurrence of any event requiring a change in the most recent forms so
delivered by it, such additional forms or amendments thereto as may be
reasonably requested by the Borrower Representative or the Administrative
Agent.  All forms or amendments
described in the preceding sentence shall certify that such Lender is entitled
to receive payments under this Agreement without deduction or withholding of
any United States federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form or amendment with respect to it and such Lender
advises the Borrower Representative and the Administrative Agent that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax.


 


For any period during which a Non-U.S. Lender has failed to provide the
Borrower Representative with an appropriate form pursuant to clause (iv),
above (unless such failure is due to a change in treaty, law or regulation, or
any change in the interpretation or administration thereof by any governmental
authority, occurring subsequent to the date on which a form originally was
required to be provided), such Non-U.S. Lender shall not be entitled to
indemnification under this Section 0 with respect to Taxes imposed by the
United States; provided that, should a Non-U.S. Lender which is otherwise
exempt from or subject to a reduced rate of withholding tax become subject to
Taxes because of its failure to deliver a form required under clause (iv),
above, the Borrowers shall take such steps as such Non-U.S. Lender shall reasonably
request to assist such Non-U.S. Lender to recover such Taxes.


 


Any Lender that is entitled to an exemption from or reduction of
withholding tax with respect to payments under this Agreement or any Note
pursuant to the law of any relevant jurisdiction or any treaty shall deliver to
the Borrower Representative (with a copy to the Administrative Agent), at the
time or times prescribed by applicable law, such properly completed and
executed documentation prescribed by applicable law as will permit such payments
to be made without withholding or at a reduced rate.


 


If the U.S. Internal Revenue Service or any other governmental
authority of the United States or any other country or any political
subdivision thereof asserts a claim that the Administrative Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered or properly


 


29

















 


completed,
because such Lender failed to notify the Administrative Agent of a change in
circumstances which rendered its exemption from withholding ineffective, or for
any other reason), such Lender shall indemnify the Administrative Agent fully
for all amounts paid, directly or indirectly, by the Administrative Agent as
tax, withholding therefor, or otherwise, including penalties and interest, and
including taxes imposed by any jurisdiction on amounts payable to the
Administrative Agent under this subsection, together with all costs and
expenses related thereto (including attorneys fees and time charges of
attorneys for the Administrative Agent, which attorneys may be employees of the
Administrative Agent).  The obligations
of the Lenders under this Section 0 shall survive the payment of the
Obligations and termination of this Agreement.


 


Lender Statements; Survival
of Indemnity.  To the extent reasonably possible, each
Lender shall designate an alternate Lending Installation with respect to its
Loans to reduce any liability of the Borrowers to such Lender under Sections 0
and 0 or to avoid the unavailability of Eurodollar Advances under
Section 0, so long as such designation is not, in the judgment of such
Lender, disadvantageous to such Lender. 
Each Lender shall deliver a written statement of such Lender to the
Borrower Representative (with a copy to the Administrative Agent) as to the
amount due, if any, under Section 0, 0, or 0.  Such written statement shall set forth in reasonable detail the
calculations upon which such Lender determined such amount and shall be final,
conclusive and binding on the Borrowers in the absence of manifest error.  Determination of amounts payable under such
Sections in connection with a Eurodollar Loan shall be calculated as though
each Lender funded its Eurodollar Loan through the purchase of a deposit of the
type and maturity corresponding to the deposit used as a reference in
determining the Eurodollar Rate applicable to such Loan, whether in fact that
is the case or not.  Unless otherwise
provided herein, the amount specified in the written statement of any Lender
shall be payable on demand after receipt by the Borrower Representative of such
written statement.  The obligations of
the Borrowers under Sections 0, 0, and 0 shall survive payment of the
Obligations and termination of this Agreement.


 


CONDITIONS PRECEDENT


 


Initial Advance.  The Lenders shall not be required to make
the initial Advance hereunder unless the Borrowers have satisfied each of the
following conditions:


 


Closing
Deliveries.  The
Borrowers shall have furnished to the Administrative Agent with sufficient
copies for the Lenders:


 


Copies of the Organizational Documents of each Credit Party, together
with all amendments, and a certificate of good standing, each certified by the
appropriate governmental officer in its jurisdiction of incorporation as well
as any other information required by Section 326 of the USA PATRIOT ACT or
necessary for the Administrative Agent or any Lender to verify the identity of
each Credit Party as required by Section 326 of the USA PATRIOT ACT.


 


Copies, certified by the Secretary or other Authorized Officer of each
Credit Party, of its Organizational Documents and, if applicable, its Board of
Directors’ resolutions and of resolutions or actions of any other body
authorizing the execution of the Loan Documents to which such Credit Party is a
party.


 


An incumbency certificate, executed by the Secretary or other
Authorized Officer of each Credit Party, which shall identify by name and title
and bear the signatures of the


 


30

















 


Authorized
Officers and any other officers of each Credit Party authorized to sign the
Loan Documents to which such Credit Party is a party, upon which certificate
the Administrative Agent and the Lenders shall be entitled to rely until
informed of any change in writing by such Credit Party.


 


A certificate, signed by the Chief Financial Officer of CWEI, stating
that on the date of the initial Advance no Default or Unmatured Default has
occurred and is continuing, and after giving effect to the Closing
Transactions, (i) the Available Aggregate Commitment (as defined in the
Senior Revolving Credit Agreement) is not less than $5,000,000, and
(ii) the Borrowers shall be in compliance, on a pro forma basis, with the
financial covenants set forth in Section 0 accompanied by reasonably
detailed calculations demonstrating compliance with the foregoing clauses (i)
and (ii).


 


A written opinion of the Borrowers’ counsel, addressed to the
Administrative Agent and Lenders in substantially the form of Exhibit A-1, and
written opinions of the Collateral Agent’s local counsel, addressed to the
Collateral Agent in substantially the form of Exhibit A-2.


 


Any Notes requested by a Lender pursuant to Section 0 payable to
the order of each such requesting Lender.


 


The Mortgages to be executed on the Closing Date pursuant to
Section 6.1, duly executed and delivered by each Credit Party or party
thereto, together with such other assignments, conveyances, amendments,
agreements and other writings, including, without limitation, UCC-1 financing
statements, tax affidavits and applicable department of revenue documentation,
creating first and prior Liens in not less than seventy-five percent (75%) of
the Adjusted Proved Reserves Present Value of the Evaluated Properties.


 


The SWR Hedge Assumption Agreement pursuant to which the Senior
Revolving Agent shall have assumed the obligations of SWR with respect to the
SWR Rate Management Transactions.


 


The Pledge Agreements duly executed and delivered by each Credit Party
that is, or upon the consummation of the Closing Transaction will become, the
owner of Capital Stock of any Material Domestic Subsidiary, partnership
interests of any Related Partnership (to the extent permitted under the
partnership agreement of such Related Partnership) or any intercompany
Indebtedness permitted under Section 0, together with (a) all certificates
(or other evidence acceptable to Administrative Agent) evidencing one hundred
percent (100%) of the issued and outstanding Capital Stock of each Material
Domestic Subsidiary of CWEI of every class, which certificates shall be duly
endorsed or accompanied by appropriate stock powers (as applicable) executed in
blank, (b) the originals of all instruments, if any, evidencing intercompany
Indebtedness permitted under Section 0 which instruments shall be duly endorsed
in blank, and (c) such other agreements and writings, including, without
limitation, UCC-1 financing statements, as reasonably requested by
Administrative Agent.


 


A Guaranty duly executed and delivered by Warrior, CWEI Acquisitions,
Romere and Romere Corp.


 


Such financing statements (including, without limitation, the financing
statements referenced in subclauses (vii) and (ix) above) as
Administrative Agent shall specify to fully


 


31

















 


evidence
and perfect all Liens contemplated by the Loan Documents, all of which shall be
filed of record in such jurisdictions as Agent shall require in its sole
discretion.


 


Written money transfer instructions, in substantially the form of
Exhibit D, addressed to the Administrative Agent and signed by an
Authorized Officer of the Borrower Representative, together with such other
related money transfer authorizations as the Administrative Agent may have reasonably
requested.


 


A copy of each Closing Document and all other material documents,
instruments and agreements executed and/or delivered by any Credit Party in
connection with the Closing Transactions, together with a certificate from an
Authorized Officer of each Borrower certifying that such copies are accurate
and complete and represent the complete understanding and agreement of the
parties with respect to the subject matter thereof.


 


The insurance certificate described in Section 0.


 


Such other documents as any Lender or its counsel may have reasonably
requested.


 


Title
Review.  The Administrative Agent or
its counsel shall have completed a review of title to the Evaluated Properties,
and such review shall not have revealed any condition or circumstance which
would reflect that the representations and warranties contained in
Section 0 hereof are inaccurate in any material respect and shall be
sufficient to verify and confirm the title of the Credit Parties to not less
than sixty-five percent (65%) of the Adjusted Proved Reserves Present Value of
the Evaluated Properties, taken as a whole.


 


Closing
Transactions.  Subject
only to the disbursement and application of the initial Advance, the Closing
Transactions shall have occurred and been consummated on the terms set forth in
the Closing Documents (or the Administrative Agent shall be satisfied that such
transactions will occur and be consummated simultaneously with the Closing
Date).


 


No
Unmatured Default or Default; Legal Matters.  No Unmatured Default or Default shall have occurred and be
continuing or would result from the consummation of the Closing Transactions
and all legal matters incident to the making of the initial Advance shall be
satisfactory to the Lenders and their counsel.


 


No
Litigation.  No
litigation, arbitration or similar proceeding shall be pending or, to the
knowledge of any Borrower, threatened which calls into question the validity or
enforceability of this Agreement, the other Loan Documents, the Closing
Transactions or the transactions contemplated hereby or thereby.


 


Closing
and Other Fees.  The
Borrowers shall have paid (1) to the Administrative Agent for the ratable
benefit of each Lender, and shall have paid to the Administrative Agent and its
Affiliates (for their own account), the fees to be paid on the Closing Date,
and (2) all fees, expenses and disbursements of counsel for the
Administrative Agent to the extent invoiced on or prior to the Closing Date,
together with such additional amounts as shall constitute such counsel’s
reasonable estimate of fees, expenses and disbursements incurred by such
counsel through the Closing Date; provided, that, such estimate
shall not thereafter preclude further settling of accounts between the
Borrowers and the Administrative Agent.


 


Representations
and Warranties.  The
representations and warranties of each Borrower and each Guarantor under this
Agreement and the other Loan Documents shall be true and correct in all
material


 


32

















 


respects as of such date, as if then made (except to the extent that
such representations and warranties related solely to an earlier date).


 


SWR
Audited Financials.  CWEI shall
have delivered to the Administrative Agent copies of the audited financial
statements of SWR for the twelve month period ending December 31, 2003 and the
results of which are not materially different from the unaudited financial
statements for such period previously provided to the Arranger; provided that
the Arranger and the Lenders acknowledge that the audited financials will
include a going concern qualification and reflect that all Indebtedness
evidenced by the Existing Credit Agreements are current Indebtedness.


 


Other
Matters.  All matters related to this
Agreement, the other Loan Documents, the Credit Parties, the Closing Documents
and the Closing Transactions shall be reasonably acceptable to each Lender, and
each Credit Party shall have delivered to the Administrative Agent and each
Lender such evidence as they shall request to substantiate any matters related
to this Agreement, the other Loan Documents, the Credit Parties, the Closing
Documents and the Closing Transactions as the Administrative Agent or any
Lender shall reasonably request.


 


Certificate of Effectiveness.  Upon satisfaction or waiver in writing by the Administrative
Agent and each Lender of each of the conditions set forth in Section 0,
each Borrower and the Administrative Agent shall execute the Certificate of
Effectiveness.  Each Lender hereby
authorizes the Administrative Agent to execute the Certificate of Effectiveness
on its behalf and acknowledges and agrees that the execution of the Certificate
of Effectiveness by the Administrative Agent shall be binding on each such
Lender.


 


REPRESENTATIONS AND
WARRANTIES


 


Each Credit Party
represents and warrants to the Lenders that on the date hereof (and after
giving effect to the Closing Transactions):


 


Existence and Standing.  Each of CWEI and its Subsidiaries is a corporation, partnership
or limited liability company duly and properly incorporated or organized, as
the case may be, validly existing and (to the extent such concept applies to
such entity) in good standing under the laws of its jurisdiction of
incorporation or organization and has all requisite authority to conduct its
business in each jurisdiction wherein failure to have such authorization may
result in a Material Adverse Effect.


 


Authorization and Validity.  Each of CWEI and its Subsidiaries has the power and authority and
legal right to execute and deliver the Loan Documents to which it is a party
and to perform its obligations thereunder. 
The execution and delivery by each Credit Party of the Loan Documents to
which it is a party and the performance of its obligations thereunder have been
duly authorized by proper corporate or limited liability company proceedings,
and the Loan Documents to which each Credit Party is a party constitute legal,
valid and binding obligations of such Credit Party enforceable against such
Credit Party in accordance with their terms in all material respects, except as
enforceability may be limited by general principles of equity and bankruptcy,
insolvency or similar laws affecting the enforcement of creditors’ rights
generally.


 


No Conflict; Government
Consent.  Neither the execution and delivery by any
Credit Party of the Loan Documents to which it is a party, nor the consummation
of the transactions therein contemplated, nor compliance with the provisions
thereof will violate (i) any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on CWEI or any Subsidiary or on the
Property of CWEI or any


 


33

















 


Subsidiary, or (ii) the Organizational Documents of any Credit
Party, or (iii) the provisions of any indenture, instrument or agreement
to which CWEI or any Subsidiary is a party or is subject, or by which it, or
its Property, is bound, or conflict with or constitute a default thereunder, or
result in, or require, the creation or imposition of any Lien in, of or on the
Property of CWEI or such Subsidiary pursuant to the terms of any such
indenture, instrument or agreement.  No
order, consent, adjudication, approval, license, authorization, or validation
of, or filing, recording or registration with, or exemption by, or other action
in respect of any governmental or public body or authority, or any subdivision
thereof, which has not been obtained by CWEI or such Subsidiary, is required to
be obtained by CWEI or such Subsidiary in connection with the execution and delivery
of the Loan Documents, the borrowings under this Agreement, the payment and
performance by the Credit Parties of the Obligations or the legality, validity,
binding effect or enforceability of any of the Loan Documents.


 


Financial Statements.  The Current Financials heretofore delivered to the Lenders were
prepared in accordance with Agreement Accounting Principles in effect on the
date such statements were prepared and fairly present, in all material
respects, the consolidated financial condition and operations of CWEI and its
Subsidiaries and SWR and its Subsidiaries at such date and the consolidated
results of their operations for the period then ended.


 


Material Adverse Change.  Since December 31, 2003, there has been no change in the
business, Property, prospects, condition (financial or otherwise) or results of
operations of CWEI and its Subsidiaries which could reasonably be expected to
have a Material Adverse Effect.


 


Taxes.  CWEI and its Subsidiaries have filed all
United States, as applicable, federal tax returns and all other tax returns
which are required to be filed and have paid all taxes due pursuant to said
returns or pursuant to any assessment received by CWEI or any Subsidiary,
except such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided in accordance with Agreement Accounting
Principles and as to which no action has been taken to enforce any Lien
securing such taxes.  No tax liens have
been filed and no claims are being asserted with respect to any such
taxes.  The charges, accruals and
reserves on the books of CWEI and each Subsidiary in respect of any taxes or
other governmental charges are adequate. 
If CWEI or any Subsidiary is a limited liability company, each such
limited liability company qualifies for partnership tax treatment under United
States federal tax law.


 


Litigation and Contingent
Obligations.  There is no litigation, arbitration,
governmental investigation, proceeding or inquiry pending or, to the knowledge
of any of their officers, threatened against or affecting CWEI or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect or which seeks to prevent, enjoin or delay the making of any Loans.  Other than any liability incident to any
litigation, arbitration or proceeding which could not reasonably be expected to
have a Material Adverse Effect, neither CWEI nor any Subsidiary has any
material Contingent Obligations not permitted under this Agreement or provided
for or disclosed in the financial statements referred to in Section 0.


 


Subsidiaries.  Schedule 0 contains an accurate list of all
Subsidiaries of CWEI as of the date of this Agreement and after giving effect
to the Closing Transactions, setting forth their respective jurisdictions of
organization and the percentage of their respective Capital Stock or other
ownership interests owned by CWEI or other Subsidiaries.  All of the issued and outstanding shares of
Capital Stock or other ownership interests of CWEI and such Subsidiaries have
been (to the extent such concepts are relevant with respect to such ownership
interests) duly authorized and issued and are fully paid and non-assessable.


 


ERISA.  The Unfunded Liabilities of all Single
Employer Plans do not in the aggregate exceed $2,000,000.  Neither CWEI nor any other member of the
Controlled Group has incurred, or is reasonably


 


34

















 


expected to incur, any withdrawal liability to Multiemployer Plans in
excess of $2,000,000 in the aggregate. 
Each Plan complies in all material respects with all applicable
requirements of law and regulations, no Reportable Event has occurred with
respect to any Plan, neither CWEI nor any other member of the Controlled Group
has withdrawn from any Plan or initiated steps to do so, and no steps have been
taken to reorganize or terminate any Plan.


 


Accuracy of Information.  No information, exhibit or report furnished by CWEI or any
Subsidiary to the Administrative Agent or to any Lender in writing in connection
with the negotiation of, or compliance with, the Loan Documents contained any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statements contained therein not misleading as of the
date it was furnished.  No
representation is made as to the projections other than that the projections
are based on information that a Credit Party believed to be accurate and were
calculated in a manner a Credit Party believed to be accurate.


 


Material Agreements.  Except for certain defaults under the Existing Credit Agreements
previously disclosed to the Administrative Agent and Lenders, neither CWEI nor
any Subsidiary is in default in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in (i) any
agreement to which it is a party, which default could reasonably be expected to
have a Material Adverse Effect or (ii) any agreement or instrument
evidencing or governing Material Indebtedness. 
Simultaneous with or prior to the initial Advance, the Borrowers shall
have executed and delivered the SWR Acquisition Documents and shall have
consummated the transactions contemplated thereby to be consummated on or prior
to the Closing Date (including, without limitation, the SWR Merger) without
amendment, modification or waiver of any material condition.  All of the representations and warranties of
each of the Credit Parties (including, to the knowledge of CWEI, SWR and its
Subsidiaries) contained in the SWR Acquisition Documents are true and correct
as of the Closing Date.


 


Compliance With Laws.  CWEI and its Subsidiaries have complied with all applicable
statutes, rules, regulations, orders and restrictions of any domestic or
foreign government or any instrumentality or agency thereof having jurisdiction
over the conduct of their respective businesses or the ownership of their
respective Property except for any failure to comply with any of the foregoing
which could not reasonably be expected to have a Material Adverse Effect.


 


Ownership of Properties.  Except as set forth on Schedule 5.13, on the date of this
Agreement, CWEI and its Subsidiaries will have good and defensible title, free
of all Liens other than Permitted Liens, to all of the material Property (other
than Oil and Gas Interests) and assets reflected in CWEI’s most recent
consolidated financial statements provided to the Administrative Agent.  On the Closing Date, SWR has good and
defensible title, free of all Lien, other than Permitted Liens, to the
partnership interests in the Related Partnerships set forth on Schedule
7.15(vi).


 


Oil and Gas Interests.  The Credit Parties and/or the Related Partnership have good and
defensible title to all Oil and Gas Interests (including Attributable
Interests) described in the most recent Reserve Report provided to the
Administrative Agent, free and clear of all Liens except Permitted Liens.  All such Oil and Gas Interests (including
Attributable Interests) are valid, subsisting, and in full force and effect,
and all rentals, royalties, and other amounts due and payable in respect
thereof have been duly paid.  Without
regard to any consent or non-consent provisions of any joint operating
agreement covering any Credit Party’s or any Related Partnership’s Proved Oil
and Gas Interests, such Credit Party’s and/or such Credit Party’s Attributed
Interest in any Related Partnership’s share of (i) the costs for each
Proved Oil and Gas Interests described in the Reserve Report is not materially
greater than the decimal fraction set forth in the Reserve Report, before and
after payout, as the case may be, and described therein by the respective
designations “working interests,” “WI,” “gross working interest,” “GWI,” or
similar terms (except in such cases where there is a corresponding increase in the
net revenue interest), and


 


35

















 


(ii) production from, allocated to, or attributed to each such
Proved Oil and Gas Interests is not materially less than the decimal fraction
set forth in the Reserve Report, before and after payout, as the case may be,
and described therein by the designations “net revenue interest,” “NRI,” or
similar terms.  Each well drilled in
respect of Proved Producing Oil and Gas Interests described in the Reserve
Report (y) is capable of, and is presently, either producing Hydrocarbons in
commercially profitable quantities or in the process of being worked over or
enhanced, and a Credit Party or a Related Partnership is currently receiving
payments for its share of production (including production from the
Attributable Interests), with no funds in respect of any thereof being
presently held in suspense, other than any such funds being held in suspense
pending delivery of appropriate division orders, and (z) has been drilled,
bottomed, completed, and operated in compliance with all applicable Laws, in
the case of clauses (y) and (z), except where any failure to satisfy clause (y)
or to comply with clause (z) would not have a Material Adverse Effect, and no
such well which is currently producing Hydrocarbons is subject to any penalty
in production by reason of such well having produced in excess of its allowable
production.


 


Plan Assets; Prohibited
Transactions.  No Credit Party is an entity deemed to hold
“plan assets” within the meaning of 29 C.F.R. § 2510.3-101 of an employee
benefit plan (as defined in Section 3(3) of ERISA) which is subject to
Title I of ERISA or any plan (within the meaning of Section 4975 of the
Code), and neither the execution of this Agreement nor the making of Loans
hereunder gives rise to a prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code.


 


Environmental Matters.  In the ordinary course of its business, the
officers of CWEI and each Subsidiary consider the effect of Environmental Laws
on the business of CWEI and its Subsidiaries, in the course of which they
identify and evaluate potential risks and liabilities accruing to CWEI or any
Subsidiary due to Environmental Laws. 
On the basis of this consideration, CWEI has concluded that there are no
violations of Environmental Laws that, individually or in the aggregate, are
reasonably be expected to have a Material Adverse Effect.  Neither CWEI nor any Subsidiary has received
any notice to the effect that its operations are not in material compliance
with any of the requirements of applicable Environmental Laws or are the
subject of any federal or state investigation evaluating whether any remedial
action is needed to respond to a release of any toxic or hazardous waste or
substance into the environment, which non-compliance or remedial action could
reasonably be expected to have a Material Adverse Effect.


 


Investment Company Act.  Neither CWEI nor any Subsidiary is an “investment company” or a
company “controlled” by an “investment company”, within the meaning of the
Investment Company Act of 1940, as amended.


 


Public Utility Holding
Company Act.  Neither CWEI nor any Subsidiary is a
“holding company” or a “subsidiary company” of a “holding company”, or an
“affiliate” of a “holding company” or of a “subsidiary company” of a “holding
company”, within the meaning of the Public Utility Holding Company Act of 1935,
as amended.


 


Post-Retirement Benefits.  The present value of the expected cost of post-retirement medical
and insurance benefits payable by CWEI and the Subsidiaries to its employees
and former employees, as estimated by CWEI in accordance with procedures and
assumptions deemed reasonable by the Required Lenders, does not exceed
$2,000,000.


 


Insurance.  The certificate signed by the President or
Chief Financial Officer of CWEI, that attests to the existence and adequacy of,
and summarizes, the property and casualty insurance program carried by CWEI and
its Subsidiaries with respect to itself and its Subsidiaries and that has been
furnished by CWEI to the Administrative Agent and the Lenders, is complete and
accurate in all material respects and demonstrates the Credit Parties’
compliance with Section 0.  This
summary includes the insurer’s or


 


36

















 


insurers’ name(s), policy number(s), expiration date(s), amount(s) of
coverage, type(s) of coverage, exclusion(s), and deductibles.  This summary also includes similar
information, and describes any reserves, relating to any self-insurance program
that is in effect.


 


Solvency.


 


Immediately after the consummation of the Closing Transactions and
immediately following the making of each Loan, if any, made on the date hereof
and after giving effect to the application of the proceeds of any Loans, (a)
the fair value of the assets of CWEI and its Subsidiaries on a consolidated
basis, at a fair valuation, will exceed the debts and liabilities,
subordinated, contingent or otherwise, of CWEI and its Subsidiaries on a
consolidated basis; (b) the present fair saleable value of the Property of CWEI
and its Subsidiaries on a consolidated basis will be greater than the amount
that will be required to pay the probable liability of CWEI and its
Subsidiaries on a consolidated basis on their debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (c) CWEI and its Subsidiaries on a consolidated
basis will be able to pay their debts and liabilities, subordinated, contingent
or otherwise, as such debts and liabilities become absolute and matured; and
(d) CWEI and its Subsidiaries on a consolidated basis will not have
unreasonably small capital with which to conduct the businesses in which they
are engaged as such businesses are now conducted and are proposed to be
conducted after the date hereof.


 


CWEI does not intend to, or to permit any Subsidiary to, and does not
believe that it or any Subsidiary will, incur debts beyond its ability to pay
such debts as they mature, taking into account the timing of and amounts of
cash to be received by it or any such Subsidiary and the timing of the amounts
of cash to be payable on or in respect of its Indebtedness or the Indebtedness
of any such Subsidiary.


 


COLLATERAL AND GUARANTIES


 


Collateral Security and
Guaranties.


 


The Obligations shall be secured by first and prior Liens (subject only
to Permitted Liens described in clauses (i) through (ix) and clause (xi)
of the definition thereof) covering and encumbering (i) not less than
seventy-five percent (75%) of the Adjusted Proved Reserves Present Value of the
Evaluated Properties, (ii) all of the issued and outstanding Capital Stock
of each Material Domestic Subsidiary of each Credit Party and not less than
sixty-five percent (65%) of the issued and outstanding Capital Stock of each
Foreign Subsidiary of each Credit Party, (iii) all partnership interests in the
Related Partnerships owned by each Credit Party, to the extent permitted under
the partnership agreement of each such Related Partnership, and (iv) all
intercompany Indebtedness held by each Credit Party.  On the Closing Date, each Credit Party shall deliver to
Collateral Agent for the ratable benefit of each Lender, the Mortgages in form
and substance acceptable to the Administrative Agent and duly executed by such
Credit Party, together with such other assignments, conveyances, amendments,
agreements and other writings, including, without limitation, UCC-1 financing
statements (each duly authorized and executed, as applicable) as the Administrative
Agent shall deem necessary or appropriate to grant, evidence and perfect first
and prior Liens (subject only to Permitted Liens of the type described in
clauses (i) through (ix) and clause (xi) of the definition thereof) in the
Evaluated Properties and other interests of each Credit Party required by this


 


37

















 


Section 0.  Each Credit Party hereby authorizes
Collateral Agent, and its agents, successors and assigns, to file any and all
necessary financing statements under the Uniform Commercial Code, assignments
or continuation statements as necessary from time to time (in the
Administrative Agent’s discretion) to perfect (or continue perfection of) the
Liens granted pursuant to the Loan Documents.


 


From time to time after the Closing Date and at such times as the
Administrative Agent or Required Lenders shall request (including, without
limitation, in connection with any title and curative review and work performed
after the Closing Date in connection with the Closing Transactions), each
Credit Party shall execute and deliver to Collateral Agent, for the ratable
benefit of each Lender, Mortgages in form and substance acceptable to the
Administrative Agent and duly executed by such Credit Party together with such
other assignments, conveyances, amendments, agreements and other writings,
including, without limitation, UCC-1 financing statements (each duly authorized
and executed, as applicable) as the Administrative Agent shall deem necessary
or appropriate to grant, evidence and perfect the Liens required by
Section 0 with respect to any Oil and Gas Interests acquired by any Credit
Party subsequent to the last date on which such Credit Party was required to
execute and deliver Mortgages pursuant to this Section 0 or which, for any
other reason are not the subject of valid, enforceable, perfected first
priority Liens (subject only to Permitted Liens of the type described in
clauses (i) through (ix) and clause (xi) of the definition thereof) in
favor of Collateral Agent for the ratable benefit of Lenders.


 


At any time any Credit Party is required to execute and deliver
Mortgages to Collateral Agent pursuant to this Section 0, each Credit
Party shall also deliver to the Administrative Agent such opinions of counsel
(including, if so requested, title opinions, and in each case addressed to the
Administrative Agent) and other evidence of title as the Administrative Agent
shall deem necessary or appropriate to verify (i) such Credit Party’s
title to not less than sixty-five percent (65%) of the Adjusted Proved Reserves
Present Value of the Evaluated Properties, and (ii) the validity,
perfection and priority of the Liens created by such Mortgages and such other
matters regarding such Mortgages as the Administrative Agent shall reasonably
request.


 


To the extent required or contemplated by the terms of Section 0
or Section 0, CWEI shall, and shall cause each of its Subsidiaries, to
execute and deliver to the Collateral Agent a Pledge Agreement, together with
(i) all certificates (or other evidence acceptable to the Administrative
Agent) evidencing the issued and outstanding Capital Stock required to be
pledged pursuant to Section 0 duly endorsed or accompanied by stock powers
executed in blank (as applicable), and (ii) such UCC-1 financing
statements as Administrative Agent shall deem necessary or appropriate to
grant, evidence and perfect the Liens required by Section 0 in the issued
and outstanding Capital Stock of such Subsidiaries, all partnership interests
of any Related Partnership (to the extent permitted under the partnership
agreement of such Related Partnership) and any intercompany Indebtedness
permitted under Section 7.11(v).


 


Guarantees.  Payment and performance of the Obligations
shall be fully guaranteed by each Material Domestic Subsidiary (other than any
Borrower) and, if required pursuant to Section 7.28, each Domestic Subsidiary
of CWEI (other than a Borrower) pursuant to a Guaranty, and CWEI shall cause
each such Subsidiary to execute and deliver to the Administrative Agent and
Lenders such Guaranty.


 


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COVENANTS


 


During the term of this
Agreement, unless the Required Lenders shall otherwise consent in writing:


 


Financial and Other
Reporting.  Each Credit Party will maintain, and cause
each of its Subsidiaries to maintain, a system of accounting established and
administered in accordance with Agreement Accounting Principles, and furnish to
the Administrative Agent:


 


Within 120 days after the close of each of its Fiscal Years, an
unqualified (except for qualifications relating to changes in accounting
principles or practices reflecting changes in Agreement Accounting Principles
and required or approved by CWEI’s independent certified public accountants)
audit report certified by independent certified public accountants acceptable
to the Administrative Agent, prepared in accordance with Agreement Accounting
Principles on a consolidated basis for CWEI and its Subsidiaries, including a
consolidated balance sheet as of the end of such period, related profit and
loss and reconciliation of surplus statements, and a statement of cash flows
and beginning with Fiscal Year 2004 setting forth in each case in comparative
form the figures for the previous Fiscal Year, accompanied by any management
letter prepared by said accountants.


 


Within 60 days after the close of each of the first three (3) Fiscal
Quarters of each Fiscal Year of CWEI, for CWEI and its Subsidiaries,
consolidated unaudited balance sheets as at the close of each such period and
consolidated profit and loss and reconciliation of surplus statements and a
statement of cash flows for such Fiscal Quarter and for the period from the
beginning of such Fiscal Year to the end of such Fiscal Quarter, all certified
by its Chief Financial Officer.


 


As soon as delivered, copies of any Reserve Report delivered to the
Senior Revolving Agent or Banks pursuant to the terms of the Senior Revolving
Credit Agreement. As soon as available and in any event on or before April 1
and October 1 of each calendar year, beginning October 1, 2004, a Qualified
Reserve Report with respect to the Oil and Gas Interests of CWEI and its
Subsidiaries prepared as of the immediately preceding January 1 and
July 1, respectively.


 


Together with the financial statements required under clauses (i) and
(ii) of Section 0, and on October 1 and April 1 of each year, a compliance
certificate in substantially the form of Exhibit B signed by the Chief
Financial Officer of CWEI showing the calculations necessary to determine
compliance with this Agreement (other than the financial covenant set forth in
Section 0 which compliance is determined on October 1, and April 1 of each
year) and stating that, to the knowledge of the Authorized Officers, no Default
or Unmatured Default exists, or if any Default or Unmatured Default exists,
stating the nature and status thereof.


 


Together with the Reserve Reports required under Section 0, a
report, in reasonable detail, setting forth the Rate Management Transactions
then in effect, the notional volumes of and prices for, on a monthly basis and
in the aggregate, the Crude Oil and Natural Gas for each such Rate Management
Transaction and the term of each such Rate Management Transaction.


 


39

















 


As soon as possible and in any event within 10 days after receipt by
CWEI or any Subsidiary, a copy of (a) any notice or claim to the effect that
CWEI or any Subsidiary is or may be liable to any Person as a result of the
release by CWEI, any Subsidiary, or any other Person of any toxic or hazardous
waste or substance into the environment, and (b) any notice alleging any
violation of any national, provincial or local environmental, health or safety
law or regulation by CWEI or any Subsidiary, which, in either case with respect
to the foregoing clauses (a) and (b), could reasonably be expected to have a
Material Adverse Effect.


 


At the Administrative Agent’s request, copies of any financial or other
report or notice delivered to the Senior Revolving Agent or the Banks pursuant
to the Senior Revolving Credit Agreement not otherwise delivered to the Lenders
pursuant to this Section 0.


 


Promptly upon the furnishing thereof to the shareholders of CWEI,
copies of all financial statements, reports and proxy statements so furnished.


 


Promptly upon the filing thereof, copies of all registration statements
and annual, quarterly, monthly or other regular reports which CWEI or any of
its Subsidiaries files with the Securities and Exchange Commission.


 


Such other information (including non-financial information) as the
Administrative Agent or the Required Lenders may from time to time reasonably
request.


 


If any information which
is required to be furnished to the Administrative Agent under this
Section 0 is required by law or regulation to be filed with a government
body on an earlier date, then the information required hereunder shall be
furnished to the Administrative Agent within five (5) Business Days after such
earlier date.


 


Use of Proceeds.  The Borrowers will use the proceeds of the
initial Advances for (i) funding the SWR Acquisition and (ii) working
capital and other general corporate purposes.


 


Notice of Default.  CWEI will give prompt notice in writing to the Administrative
Agent and Lenders of the occurrence of any Default or Unmatured Default and of
any other development, financial or otherwise, which could reasonably be
expected to have a Material Adverse Effect.


 


Conduct of Business; Fiscal
Year.  Each Borrower will, and will cause each
other Credit Party to, carry on and conduct its business in substantially the
same manner and in substantially the same fields of enterprise as it is
presently conducted and do all things necessary to remain duly incorporated or
organized, validly existing and (to the extent such concept applies to such
entity) in good standing as a corporation, partnership or limited liability
company in its jurisdiction of incorporation or organization, as the case may
be, and maintain all requisite authority to conduct its business in each
jurisdiction in which its business is conducted except wherein failure to
maintain such authority would not reasonably be expected to have a Material
Adverse Effect.  CWEI shall not, nor
shall it permit any of its Subsidiaries to change its Fiscal Year-end from
December 31.


 


Taxes.  Each Borrower will, and will cause each of
its Subsidiaries to, timely file national and applicable foreign, provincial,
state and local tax returns required by law which returns shall be complete and
correct in all material respects and pay when due all taxes, assessments and
governmental charges and levies upon it or its income, profits or Property,
except those which are being contested in good faith


 


40

















 


by appropriate proceedings and with respect to which adequate reserves
have been set aside in accordance with Agreement Accounting Principles.


 


Insurance.  Each Borrower will, and will cause each of
its Subsidiaries to, maintain with financially sound and reputable insurance
companies insurance on all their Property in such amounts and covering such
risks as is consistent with sound business practice, and CWEI will furnish to
the Administrative Agent and any Lender upon request full information as to the
insurance carried. In addition, upon request of the Administrative Agent, CWEI
will furnish or cause to be furnished to the Administrative Agent from time to
time a summary of the respective insurance coverage of each Credit Party in
form and substance reasonably satisfactory to the Administrative Agent, and, if
requested, will furnish the Administrative Agent copies of the applicable
policies.  Upon demand by Administrative
Agent, any insurance policies covering any such property shall be endorsed
(i) to provide that such policies may not be cancelled, reduced or
affected in any manner for any reason without fifteen (15) days prior notice to
Administrative Agent, (ii) to provide for insurance against fire, casualty
and other hazards normally insured against, in amounts customary in the
industry for similarly situated business and properties, and (iii) to
provide for such other matters as the Lenders may reasonably require.  Each Credit Party shall at all times
maintain insurance in amounts customary in the industry for similarly situated
business and properties with respect to the Collateral against their liability
for injury to persons or property, which insurance shall be by financially
sound and reputable insurers and shall without limitation provide the following
coverages:  comprehensive general
liability (including coverage for damage to underground resources and
equipment, damage caused by blowouts or cratering, damage caused by explosion,
damage to underground minerals or resources caused by saline substances, broad
form property damage coverage, broad form coverage for contractually assumed
liabilities and broad form coverage for acts of independent contractors),
worker’s compensation and automobile liability.  Each Credit Party shall at all times maintain insurance with
respect to the Collateral which shall insure such Credit Party against seepage
and pollution expense if deemed economical in the reasonable discretion of such
Credit Party.


 


Compliance with Laws.  Each Borrower will, and will cause each of its Subsidiaries to,
comply with all applicable laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject including, without
limitation, all Environmental Laws except wherein failure to comply could not
reasonably be expected to have a Material Adverse Effect.


 


Maintenance of Properties.  Each Borrower will, and will cause each other Credit Party to,
use its best efforts to maintain, preserve, protect and keep its Property in
good repair, working order and condition, and make all necessary and proper
repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times consistent with
customary applicable industry standards, except where the failure to do so could
not reasonably be expected to have a Material Adverse Effect.


 


Inspection.  Each Borrower will, and will cause each
other Credit Party to, permit the Administrative Agent and the Lenders, by
their respective representatives and agents, to inspect any of the Property,
books and financial records of such Credit Party, to examine and make copies of
the books of accounts and other financial records of such Credit Party, and to
discuss the affairs, finances and accounts of such Credit Party with, and to be
advised as to the same by, their respective officers upon advance notice at
such reasonable times and intervals as the Administrative Agent or any Lender
may reasonably designate.  The
Administrative Agent and each Lender will use its best efforts to keep all such
information confidential and will not without prior written consent disclose or
reveal the information or any part thereof to any Person other than as
permitted under Section 0


 


41

















 


Dividends.  No Borrower will, nor will any Borrower
permit any of its Subsidiaries to, declare or pay any dividends or make any
distributions on its Capital Stock (other than dividends payable in its own
common stock) or redeem, repurchase or otherwise acquire or retire any of its
Capital Stock at any time outstanding, except, any Subsidiary of CWEI may
declare and pay dividends or make distributions to its direct parent.


 


Indebtedness.  No Borrower will, nor will any Borrower
permit any of its Subsidiaries to, create, incur or suffer to exist any
Indebtedness, except:


 


The Loans and the Guaranties.


 


Indebtedness existing on the date hereof and described in Schedule 0.


 


Indebtedness arising under Rate Management Transactions permitted under
clause (v) of Section 0.


 


Indebtedness of any Borrower and any Guarantor arising under the Senior
Revolving Credit Documents.


 


Indebtedness of any Borrower to any other Borrower, or of any Guarantor
to any Borrower or to any other Guarantor, or of any Borrower to any Guarantor;
provided,
that, all such Indebtedness shall be unsecured and subordinated in
right of payment to the payment in full of all of the Obligations in a manner
and on terms and conditions reasonably satisfactory to the Administrative
Agent, provided
further that, upon the written request of the Administrative Agent
and within thirty (30) days of such request, the Credit Parties shall cause
such Indebtedness to be evidenced by promissory notes reasonably satisfactory
to the Administrative Agent, and shall cause such promissory notes to be
subject to a first priority Lien in favor of the Collateral Agent for the
benefit of the Lenders and the Senior Revolving Lenders on terms and conditions
reasonably satisfactory to the Administrative Agent.


 


Indebtedness consisting of Vendor Financings.


 


Purchase Money Indebtedness and Capitalized Lease Obligations in an
aggregate amount at any time outstanding not to exceed $1,000,000.


 


Indebtedness of SWR and Blue Heel evidenced by the Unsecured Notes in
an aggregated principal amount at any time outstanding not to exceed
$8,870,000; provided,
that within ten (10) Business Days after the Closing Date, CWEI
establishes and thereafter maintains a demand deposit account with the
Administrative Agent with an initial balance on the Closing Date of not less
than $9,000,000 and a collected balance thereafter at least equal to the
outstanding principal balance of the Unsecured Notes and withdrawals and
disbursements from such demand deposit account are made solely to pay the
consideration required to redeem or purchase such Unsecured Notes.


 


Unsecured Indebtedness not included in the foregoing clauses (i)
through (vii) which does not exceed at any time outstanding  $7,000,000.


 


Indebtedness arising under renewals or extensions of (but not increases
in the principal amount) of the Indebtedness described in any of the foregoing
clauses (ii), (iv) and (viii).


 


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Disqualified Stock.  No Borrower will, nor will any Borrower permit any of its
Subsidiaries to, issue any Disqualified Stock.


 


Merger.  Except for the SWR Merger, no Borrower will,
nor will any Borrower permit any other Credit Party to merge or consolidate
with or into any other Person, except that so long as no Default or Unmatured
Default has occurred and is continuing or would be caused thereby, any Credit
Party may merge with or into any other Credit Party; provided that, if CWEI is a party to such merger, CWEI is
the continuing or surviving Person in such merger.


 


Sale of Assets.  No Borrower will, nor will any Borrower
permit any other Credit Party to, lease, sell or otherwise dispose of its
Property (including any Attributed Interests) to any other Person, except:


 


Sales of Hydrocarbons in the ordinary course of business.


 


Provided no Default or Unmatured Default exists or would result
therefrom, the (a) sale, lease, transfer, abandonment, exchange or other
disposition of (1) Oil and Gas Interests to the extent permitted under
Section 0, (2) Oil and Gas Interests to the Incentive Partnerships and to
various employees of the Credit Parties as incentive compensation to such
employees; provided,
that the aggregate amount of Oil and Gas Interests transferred and
assigned with respect to any well for such purposes shall not exceed five
percent (5%) of the Credit Parties’ undivided interest in such well, taken as a
whole, (3)  Attributable Interests to
any Credit Party pursuant to Section 7.15(iii), (4) equipment and related items
in the ordinary course of business, that are obsolete or no longer necessary in
the business of any Credit Party or that is being replaced by equipment of
comparable value and utility, and (5) other Property of any Credit Party other
than Capital Stock of any Credit Party but including Oil and Gas Interests
(including Attributed Interests), with a value not to exceed $7,000,000 in the
aggregate for all Credit Parties, on a consolidated basis, during each
six-month period beginning on each May 1 and November 1, and (b) sales of Oil
and Gas Interests (including Attributed Interests) of any Credit Party not
permitted by clause (a); provided, that (1) a majority of
disinterested members of the Board of Directors of CWEI have reviewed the
agreements related to such sale and have determined (as evidenced by certified
resolutions of such majority of the members of the Board of Directors delivered
to the Administrative Agent not less than five Business Days prior to the
scheduled closing date of such sale) that the total consideration payable to
the appropriate Credit Party with respect to such sale is the fair value of
such Oil and Gas Interests or Attributed Interests, (2) total consideration
(all non-cash consideration to be valued at its net present value based on a
discount rate of 10%) payable to the appropriate Credit Party with respect to
such sale shall not be less than Proved Reserves Present Value of such Oil and
Gas Interests or Attributable Interests, as the case may be, (3) not less
than 80% of the aggregate consideration payable to the appropriate Credit Party
with respect to such sale is payable in cash in a single payment on the closing
date; and (4) upon the consummation of such sale, such Credit Party applies the
entire net proceeds, promptly upon the receipt thereof, to the payment of the
Indebtedness evidenced by the Senior Revolving Credit Agreement or to Lenders
to repay the Loans if all of the Indebtedness evidenced by the Senior Revolving
Credit Agreement has been paid in full and all financing commitments thereunder
have been terminated.  For purposes of
the foregoing clause (a)(4), the value of any Oil and Gas Interests or
Attributed Interests shall be the greater of the Proved Reserves Present Value
of such Oil and Gas Interests or Attributed Interests, as the case may be, or
the gross proceeds received from the sale, lease, transfer, abandonment,
exchange or other disposition of such Oil and Gas Interests or Attributed
Interests, as the case may be (or in the case of any exchange, the net Proved
Reserves Present Value realized or resulting from


 


43

















 


such
exchange) and the value of any other Property shall be the value determined in
good faith by CWEI.


 


With the prior written consent of Required Lenders, the sale, transfer
or other disposition of Evaluated Properties not otherwise permitted by clause
(ii).


 


Investments and Acquisitions.  No Borrower will, nor will any Borrower permit any other Credit
Party to, make or suffer to exist any Investments (including without
limitation, loans and advances to, and other Investments in, Subsidiaries), or
commitments therefor, or to create any Subsidiary or to become or remain a
partner in any partnership or joint venture, or to make any Acquisition,
except:


 


Cash Equivalent Investments.


 


Existing Investments in the Subsidiaries (including the Investments
contemplated by the Closing Transactions) and other Investments in existence on
the date hereof and described in Schedule 0.


 


Investments with or acquired from Persons not an Affiliate of a Credit
Party (other than the Related Partnerships) that are (a) customary in the
oil and gas business, (b) made in the ordinary course of such Borrower’s
or such Credit Party’s business, and (c) made in the form of, or pursuant
to, oil, gas and mineral leases, operating agreements, farm-in agreements,
farm-out agreements, development agreements, unitization agreements, joint
bidding agreements, services contracts and other similar agreements that a
reasonable and prudent oil and gas industry owner or operator would find
acceptable.


 


Investments by any Credit Party consisting of intercompany Indebtedness
permitted under Section 7.11(v) and other Investments by any Credit Party in
any other Credit other than Capital Stock of any direct or indirect parent of
such Credit Party.


 


Investments by any Borrower consisting of the Rate Management
Transactions entered into with Approved Counterparties in the ordinary course
of business and not for speculative purposes; provided that such Rate
Management Transactions (a) would not cause the aggregate notional amount of
Hydrocarbons under all Rate Management Transactions then in effect to exceed
eighty percent (80%) of the “forecasted production proved reserves” (as defined
below) of CWEI and its Material Domestic Subsidiaries for the forthcoming three
(3) year period, (b) together with any other Rate Management Transactions then
in effect for the purpose of hedging Borrowers’ interest rate exposure would
not cause the notional amount of all such Rate Management Transactions then in
effect for such purpose to exceed one hundred percent (100%) of the total
Consolidated Funded Indebtedness of Borrowers projected to be outstanding for
any period covered by such Rate Management Transaction, or (c) are for the
purpose of hedging the foreign currency risk associated with the Credit
Parties’ operations, if any.  As used in
this clause (v) of Section 0, “forecasted production from proved
reserves” means the forecasted production of Crude Oil and Natural Gas as
reflected in the most recent Reserve Report delivered to the Administrative
Agent pursuant to clause (iii) of Section 0, after giving effect to
any pro forma adjustments for the consummation of any acquisitions or
dispositions since the effective date of such Reserve Report.


 


Investments by any Borrower consisting of the purchase, redemption or
acquisition of partnership interests in the Related Partnerships pursuant to
the exercise of certain


 


44

















 


rights
under the partnership agreements of such Related Partnerships by the holders of
such interests.


 


Investments by any Credit Party consisting of the payment of each
Incentive Partnerships’ share of the costs and expenses incurred to drill,
complete and operate oil and gas wells located on the properties covered by the
Oil and Gas Interests owned by such Incentive Partnerships; provided
that such Incentive Partnerships’ share of such costs and expenses
do not exceed 5% of the total amount of such costs and expenses for all Credit
Parties in such properties and such Credit Party receives all revenues from
such Oil and Gas Interests until payout of its costs and expenses, plus
interest.


 


Other Investments not otherwise described in clauses (i) through (vii)
above; provided
that, the aggregate amount of all other Investments made pursuant to this
clause (viii) outstanding at any time shall not exceed $1,500,000
(calculated based on the original cost of such Investment).


 


Liens.  No Borrower will, nor will any Borrower
permit any other Credit Party or any Related Partnership to, create, incur, or
suffer to exist any Lien in, of or on the Property of any Credit Party or any
Related Partnership, except Permitted Liens.


 


Affiliates.  No Borrower will, nor will any Borrower
permit any other Credit Party to, enter into any transaction (including,
without limitation, the purchase or sale of any Property or service) with, or
make any payment or transfer to, any Affiliate except transactions not
otherwise prohibited under this Agreement or any other Loan Document made in
the ordinary course of business and pursuant to the reasonable requirements of
such Credit Party’s business and upon fair and reasonable terms no less
favorable to such Credit Party than such Credit Party would obtain in a
comparable arms-length transaction.


 


Amendments to Organizational
and Other Documents.  No Borrower will, nor will any Borrower
permit any other Credit Party to, enter into or permit any modification or
amendment of, or waive any material right or obligation of any Person under (a)
its Organizational Documents other than amendments, modifications and waivers
which will not, individually or in the aggregate, have a Material Adverse
Effect or (b) the Senior Revolving Credit Agreement if the effect of any such
modification or amendment is to (i) increase the maximum principal amount
of the commitments under the Senior Revolving Credit Agreement to an amount in
excess of $300,000,000, or (ii) increase the applicable margin with
respect to the interest rate on any of the Indebtedness evidenced by the Senior
Revolving Credit Agreement by more than 2.00% per annum (excluding any increase
resulting from the application of any default rate of interest).


 


Sale and Leaseback
Transactions and other Off-Balance Sheet Liabilities.  No Borrower will, nor will any Borrower permit any other Credit
Party to, enter into or suffer to exist any (i) Sale and Leaseback
Transaction or (ii) any other transaction pursuant to which it incurs or
has incurred Off-Balance Sheet Liabilities, except for Rate Management
Transactions permitted under the terms of Section 7.15 and Advance Payment
Contracts; provided, that the aggregate amount of all Advance
Payments received by any Credit Party that have not been satisfied by delivery
of production at any time does not exceed, in the aggregate $1,500,000.


 


Negative Pledge.  No Borrower will, nor will any Borrower
permit any of its Subsidiaries or any Related Partnership to, enter into or
become bound by any agreement that prohibits or otherwise restricts the right
of such Borrower, any such Subsidiary or any such Related Partnership to
create, assume or suffer to exist any Lien on any of their Property in favor of
the Collateral Agent for the ratable benefit of


 


45

















 


the Lenders (other than (i) this Agreement, (ii) the Senior Revolving
Credit Agreement, (iii) restrictions existing on the Closing Date under any
partnership agreement of any Related Partnership as in effect on the Closing
Date, and (iv) agreements evidencing Indebtedness permitted under Section
7.11(vii); provided that any such
prohibition in the agreements described in this clause (iv) is limited to the
Property securing such Indebtedness).


 


Financial Contracts.  No Borrower will, nor will any Borrower permit any other Credit
Party to, enter into or remain liable upon any Financial Contract, except Rate
Management Transactions permitted under Section 7.15(v).


 


Financial Covenants.


 


Proved Reserve Present Value Leverage Ratio.  No Borrower will permit the ratio,
determined on April 1 and October 1 of each calendar year, but as of the
immediately preceding January 1 and July 1, respectively (beginning October 1,
2004) of (i) Proved Reserves Present Value to (ii) Consolidated
Funded Indebtedness to be less than 1.50 to 1.00. CWEI’s compliance with the
forgoing ratio on April 1 and October 1 of each calendar year but as of the
immediately preceding January 1 and July 1, respectively, shall be determined
based on the Qualified Reserve Report required to be delivered to the
Administrative Agent pursuant to clause (iii) of Section 0 and
prepared as of such dates and CWEI’s Consolidated Funded Indebtedness as set
forth in the financial statements required to be delivered pursuant to clauses
(i) and (ii) of Section 0 with respect to the Fiscal Year or Fiscal
Quarters ending immediately prior to such dates, respectively (it being
acknowledged that the Borrowers shall not be required to demonstrate compliance
with the foregoing ratio as of January 1 and July 1 of each year with the
delivery of the financial statements for the Fiscal Year or Fiscal Quarter
ending immediately prior to such dates, respectively, but rather with the
delivery of a compliance certificate on April 1 and October 1 of each
year).


 


EBITDAX Leverage Ratio.  CWEI will not permit the ratio, determined as of the end of each
of its Fiscal Quarters, of (i) Consolidated Funded Indebtedness to
(ii) Consolidated EBITDAX for the then most-recently ended four Fiscal
Quarters to be greater than 3.5 to 1.0.


 


Operation of Oil and Gas
Interests.


 


Each Borrower will, and will cause each other Credit Party to,
maintain, develop and operate its Oil and Gas Interests in a good and
workmanlike manner, and observe and comply with all of the terms and
provisions, express or implied, of all oil and gas leases relating to such Oil
and Gas Interests so long as such Oil and Gas Interests are capable of
producing Hydrocarbons and accompanying elements in paying quantities, except
where such failure to comply could not reasonably be expected to have a
Material Adverse Effect.


 


Each Borrower will, and will cause each other Credit Party to, comply
in all respects with all contracts and agreements applicable to or relating to
its Oil and Gas Interests or the production and sale of Hydrocarbons and
accompanying elements therefrom, except to the extent a failure to so comply
could not reasonably be expected to have a Material Adverse Effect.


 


Each Borrower will, and will cause each other Credit Party to, at all
times maintain, preserve and keep all operating equipment used with respect to
its Oil and Gas Interests in proper repair, working order and condition, and
make all necessary or appropriate repairs, renewals, replacements, additions
and improvements thereto so that the efficiency of such


 


46

















 


operating
equipment shall at all times be properly preserved and maintained, except where
such failure to comply could not reasonably be expected to have a Material
Adverse Effect; provided, further that, no item of operating
equipment need be so repaired, renewed, replaced, added to or improved, if such
Credit Party shall in good faith determine that such action is not necessary or
desirable for the continued efficient and profitable operation of the business
of such Credit Party.


 


Title Data.  In addition to the title information
required by Section 0, each Borrower shall, and shall cause each other
Credit Party to, cause to be delivered to the Administrative Agent (i) within
sixty (60) days of the Closing Date, curative information, in form and
substance satisfactory to the Administrative Agent, with respect to the matters
described on the attached Schedule 7.24 and (ii) at any time and from time to
time, such title opinions and other information necessary or appropriate to
verify and confirm the title of the Credit Parties to be not less than
sixty-five percent (65%) of the Adjusted Proved Reserves Present Value of the
Evaluated Properties, taken as a whole.


 


Rate Management Transactions.  Within ten (10) Business Days after the Closing Date, the
Borrowers shall provide to the Administrative Agent, evidence reasonably
satisfactory to the Administrative Agent that the Borrowers have entered into
Rate Management Transactions with Approved Counterparties, and on terms and
conditions reasonably acceptable to the Administrative Agent, with respect to
not less than sixty percent (60%) of Administrative Agent’s forecasted
production from the Proved Producing Oil and Gas Interests of CWEI and its
Subsidiaries (excluding SWR and its Subsidiaries) through at least December 31,
2005.  Once confirmed, no Rate
Management Transaction may be amended or modified, or cancelled without the
prior written consent of Required Lenders. 
Each Borrower shall collaterally assign all of its right, title and interest
in each Rate Management Transaction to the Collateral Agent and shall, if
requested by the Administrative Agent or the Required Lenders, cause each such
agreement or contract to (1) expressly permit such assignment and (2) upon the
occurrence of any default or event of default under such agreement or contract,
(a) to permit the Lenders to cure such default or event of default and assume
the obligations of such Borrower under such agreement or contract and (b) to
prohibit the termination of such agreement or contract by the counterparty
thereto if the Lenders assume the obligations of the Credit Parties under such
agreement or contract and the Lenders take the actions required under the
foregoing clause (a).  Upon the
request of the Administrative Agent, the Borrower Representative shall, within
thirty (30) days of such request, provide to the Administrative Agent and each
Lender copies of all agreements, documents and instruments evidencing the Rate
Management Transactions not previously delivered to the Administrative Agent
and Lenders, certified as true and correct by an Authorized Officer of the
Borrower Representative, and such other information regarding such Rate
Management Transactions as the Administrative Agent and Lenders may reasonably
request.


 


Limitation on Exploratory
Drilling Expenses.  Except for drilling expenses required to be
incurred to avoid or prevent imminent actual physical injury of individual
persons or imminent damages or environmental contamination of Property as a
result of events outside the control of any Credit Party, unless and until the
Average Available Aggregate Commitment (as defined in the Senior Revolving
Credit Agreement) is equal to or greater than fifteen percent (15%) of the
Borrowing Base (as defined in the Senior Revolving Credit Agreement) for a
period of ten (10) consecutive Business Days, the Credit Parties shall not
incur, on a consolidated basis, more than $12,000,000 in any Fiscal Quarter in
drilling expenses for exploratory wells commenced after the Closing Date.


 


Credit Parties.  No Borrower shall permit  the aggregate fair market value of all of
the Property of all of the Credit Parties (excluding ownership interests in
Subsidiaries of any Credit Party) as at the last date of any Fiscal Quarter to
comprise less than fifteen percent (15%) of the aggregate fair market value of
all of the Property of CWEI and its Subsidiaries (excluding ownership interests
in Subsidiaries of any


 


47

















 


Credit Party) as at the last date of such Fiscal Quarter, and any such
failure continues for a period of thirty (30) days following the last day of
such Fiscal Quarter without the delivery to the Administrative Agent of
(A) a Guaranty executed by one or more Domestic Subsidiaries with Property
sufficient to cure any failure set forth above and (B) opinions of counsel
to such Domestic Subsidiaries (which shall cover, among other things, the
legality, validity, binding effect and enforceability of the Guaranty), all in
form, content and scope reasonably satisfactory to the Administrative Agent.


 


DEFAULTS


 


The occurrence of any one
or more of the following events shall constitute a Default:


 


Representations and
Warranties.  Any representation or warranty made or
deemed made by or on behalf of CWEI or any of its Subsidiaries to the Lenders
or any Agent under or in connection with this Agreement, any Loan, or any
certificate or information delivered in connection with this Agreement or any
other Loan Document shall be materially false, incorrect or misleading on the
date as of which made and such Default shall continue for more than ten (10)
days after written notice from the Administrative Agent to the Borrowers of
such Default.


 


Payments.  Nonpayment of principal of any Loan when
due, or nonpayment of interest upon any Loan or of any commitment fee or other
obligations under any of the Loan Documents within three (3) Business Days
after the same becomes due.


 


Certain Covenants.  The breach by CWEI or any of its Subsidiaries of any of the terms
or provisions of this Agreement or any of the Collateral Documents which is not
remedied within ten (10) days after written notice from the Administrative
Agent.


 


Other Material Indebtedness.  Failure of any Credit Party to pay when due any Material Indebtedness
(other than Indebtedness evidenced by the Senior Revolving Credit Documents);
or the default by any Credit Party in the performance (in each case, beyond the
applicable grace period with respect thereto, if any) of any term, provision or
condition contained in any Material Indebtedness Agreement (other than
Indebtedness evidenced by the Senior Revolving Credit Documents), or any other
event shall occur or condition exist, the effect of which default, event or
condition is to cause, or to permit the holder(s) of such Material Indebtedness
or the lender(s) under any Material Indebtedness Agreement (other than
Indebtedness evidenced by the Senior Revolving Credit Documents) to cause, such
Material Indebtedness to become due prior to its stated maturity or any
commitment to lend under any Material Indebtedness Agreement (other than
Indebtedness evidenced by the Senior Revolving Credit Documents) to be
terminated prior to its stated expiration date; or any Material Indebtedness of
any Credit Party shall be declared to be due and payable or required to be
prepaid or repurchased (other than by a regularly scheduled payment) prior to
the stated maturity thereof as a result of a default or event of default under
the Material Indebtedness Agreement evidencing such Material Indebtedness; or
any Credit Party shall not pay, or admit in writing its inability to pay, its
debts generally as they become due.


 


Insolvency Proceedings.  Any Credit Party shall (i) have an order for relief or a
receiving order entered with respect to it under the bankruptcy laws as now or
hereafter in effect in the United States, as applicable, (ii) make an
assignment for the benefit of creditors, (iii) apply for, seek, consent
to, or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any Substantial Portion of
its Property, (iv) institute any proceeding seeking an order for relief
under the bankruptcy laws as now or hereafter in effect in the United States,
as applicable, or seeking to


 


48

















 


adjudicate it a bankrupt or insolvent, or seeking dissolution, winding
up, liquidation, reorganization, arrangement, adjustment or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (v) take any
corporate or partnership action to authorize or effect any of the foregoing
actions set forth in this Section 0 or (vi) fail to contest in good faith
any appointment or proceeding described in Section 0.


 


Appointment of Receiver.  Without the application, approval or consent of any Credit Party,
a receiver, trustee, examiner, liquidator or similar official shall be
appointed for any Credit Party or any Substantial Portion of its Property, or a
proceeding described in Section 0(iv) shall be instituted against any
Credit Party and such appointment continues undischarged or such proceeding
continues undismissed or unstayed for a period of sixty (60) consecutive days.


 


Condemnation and Seizure.  Any court, government or governmental agency shall condemn, seize
or otherwise appropriate, or take custody or control of, all or any portion of
the Property of any Credit Party which, when taken together with all other
Property of the Credit Parties so condemned, seized, appropriated, or taken
custody or control of, during the twelve-month period ending with the month in
which any such action occurs, could reasonably be expected to have a Material
Adverse Effect.


 


Judgments.  Any Credit Party shall fail within 30 days
to pay, bond or otherwise discharge one or more (i) judgments or orders
for the payment of money in excess of $1,500,000 (or the equivalent thereof in
currencies other than Dollars) in the aggregate, or (ii) nonmonetary
judgments or orders which, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect, which judgment(s), in any such case,
is/are not stayed on appeal or otherwise being appropriately contested in good
faith.


 


Rate Management Obligations.  Nonpayment by any Credit Party of any Rate Management Obligation
when due or the breach by any Credit Party of any term, provision or condition
contained in any Rate Management Transaction or any transaction of the type
described in the definition of “Rate Management Transactions,” whether or not
any Bank Counterparty is a party thereto if the amount due or which could
become due as a result of such default or breach is equal to or greater than
$1,000,000.


 


Change of Control.  Any Change in Control shall occur.


 


Other Loan Documents.  The occurrence of any “default”, as defined in any Loan Document
(other than this Agreement) or the breach of any of the terms or provisions of
any Loan Document (other than this Agreement), which default or breach
continues beyond any period of grace therein provided and such default or
breach continues for a period of thirty (30) days after the earlier of (i) the
date any Authorized Officer of CWEI acquires knowledge of such failure, or
(ii) written notice of such failure has been given to CWEI by the
Administrative Agent or any Lender.


 


Guaranty.  Any Guaranty shall fail to remain in full
force or effect or any action shall be taken to discontinue or to assert the
invalidity or unenforceability of any Guaranty, or any Guarantor shall fail to
comply with any of the terms or provisions of any Guaranty to which it is a
party, or any Guarantor shall deny that it has any further liability under any
Guaranty to which it is a party, or shall give notice to such effect.


 


Unfunded Liabilities.  The Unfunded Liabilities of all Single Employer Plans shall
exceed in the aggregate $1,500,000 or any Reportable Event shall occur in
connection with any Plan.


 


49

















 


Multiemployer Plan
Withdrawal Liability.  CWEI or any other member of the Controlled
Group shall have been notified by the sponsor of a Multiemployer Plan that it
has incurred withdrawal liability to such Multiemployer Plan in an amount
which, when aggregated with all other amounts required to be paid to
Multiemployer Plans by any Credit Party or any other member of the Controlled
Group as withdrawal liability (determined as of the date of such notification),
exceeds $750,000 or requires payments exceeding $1,500,000  per annum.


 


Reorganization or
Termination of Multiemployer Plan.  CWEI or any other member of the Controlled Group shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is
in reorganization or is being terminated, within the meaning of Title IV of
ERISA, if as a result of such reorganization or termination the aggregate
annual contributions of CWEI and the other members of the Controlled Group
(taken as a whole) to all Multiemployer Plans which are then in reorganization
or being terminated have been or will be increased over the amounts contributed
to such Multiemployer Plans for the respective plan years of each such Multiemployer
Plan immediately preceding the plan year in which the reorganization or
termination occurs by an amount exceeding $1,500,000.


 


Environmental Laws.  Any Credit Party shall (i) be the subject of any proceeding
or investigation pertaining to the release by such Credit Party or any other
Person of any toxic or hazardous waste or substance into the environment, or
(ii) violate any Environmental Law, which, in the case of an event
described in clause (i) or clause (ii), could reasonably be expected
to have a Material Adverse Effect.


 


Collateral Documents.  Any Collateral Document shall for any reason fail to create a
valid and perfected security interest second in priority only to the
“Administrative Agent” and “Lenders” under the Senior Revolving Credit
Agreement in any collateral purported to be covered thereby, except as
permitted by the terms of this Agreement or any Collateral Document, or any
Collateral Document shall fail to remain in full force or effect or any action
shall be taken to discontinue or to assert the invalidity or unenforceability
of any Collateral Document, or any Credit Party shall fail to comply with any
of the terms or provisions of any Collateral Document.


 


ACCELERATION,
WAIVERS, AMENDMENTS AND REMEDIES


 


Acceleration.  If any Default described in Section 0
or 0 occurs with respect to any Credit Party, the obligations of the Lenders to
make Loans hereunder shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on the part
of the Administrative Agent or any Lender. 
If any other Default occurs, the Required Lenders (or the Administrative
Agent with the consent of the Required Lenders) may terminate or suspend the
obligations of the Lenders to make Loans hereunder, or declare the Obligations
to be due and payable, or both, whereupon the Obligations shall become
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which the Borrowers hereby expressly waive; provided that, if such Default consists
solely of the Default described in Section 8.10, the Obligations shall not be
due and payable until one hundred and twenty (120) days after the date the
Administrative Agent first receives notice or becomes aware that a Change of Control
has occurred unless some other Default occurs prior to the end of such one
hundred and twenty (120) day period.


 


If, within thirty (30)
days after acceleration of the maturity of the Obligations or termination of
the obligations of the Lenders to make Loans hereunder as a result of any
Default (other than any Default as described in Section 0 or 0 with
respect to any Credit Party) and before any judgment or decree for the payment
of the Obligations due shall have been obtained or entered, the Required Lenders
(in their sole


 


50

















 


discretion) shall so direct, then the Administrative
Agent shall, by notice to the Borrowers, rescind and annul such acceleration
and/or termination.


 


Amendments.  Subject to the provisions of this
Section 0, the Required Lenders (or the Administrative Agent with the
consent in writing of the Required Lenders) and each Credit Party may enter
into agreements supplemental hereto for the purpose of adding or modifying any
provisions to the Loan Documents or changing in any manner the rights of the
Lenders or such Credit Party hereunder or waiving any Default hereunder; provided, however, that no such
supplemental agreement shall, without the consent of all of the Lenders:


 


Extend the final maturity of any Loan to a date after the Facility
Termination Date or forgive all or any portion of the principal amount thereof,
or reduce the rate or extend the time of payment of interest or fees thereon.


 


Reduce the percentage specified in the definition of Required Lenders.


 


Extend the Facility Termination Date, or reduce the amount or extend
the payment date for, the mandatory payments required under clause (ii) of
Section 2.6.2, or increase the amount of the Aggregate Commitment or of
the Commitment of any Lender hereunder, or permit any Borrower to assign its
rights under this Agreement.


 


Amend this Section 0.


 


Release any guarantor of any Advance or, except as otherwise provided
in Section 0, release any of the Collateral.


 


No amendment
of any provision of this Agreement relating to the Administrative Agent shall
be effective without the written consent of the Administrative Agent.  The Administrative Agent may waive payment
of the fee required under Section 0 without obtaining the consent of any
other party to this Agreement.


 


Preservation of Rights.  No delay or omission of the Lenders or the Administrative Agent
to exercise any right under the Loan Documents shall impair such right or be
construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
any Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. 
Any single or partial exercise of any such right shall not preclude
other or further exercise thereof or the exercise of any other right, and no
waiver, amendment or other variation of the terms, conditions or provisions of
the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders
required pursuant to Section 0, and then only to the extent in such
writing specifically set forth.  All
remedies contained in the Loan Documents or afforded by law shall be cumulative
and all shall be available to the Administrative Agent and the Lenders until
the Obligations have been paid in full.


 


GENERAL PROVISIONS


 


Survival of Representations.  All representations and warranties of each Credit Party contained
in this Agreement shall survive the making of the Loans herein contemplated.


 


51

















 


Governmental Regulation.  Anything contained in this Agreement to the contrary
notwithstanding, no Lender shall be obligated to extend credit to any Borrower
in violation of any limitation or prohibition provided by any applicable
statute or regulation.


 


Headings.  Section headings in the Loan Documents are
for convenience of reference only, and shall not govern the interpretation of
any of the provisions of the Loan Documents.


 


Entire Agreement.  The Loan Documents embody the entire agreement and understanding
among the Borrowers, the Guarantors, the Administrative Agent and the Lenders
and supersede all prior agreements and understandings among the Borrowers, the
Guarantors, the Administrative Agent and the Lenders relating to the subject
matter thereof other than those contained in the fee letter described in
Section 0 which shall survive and remain in full force and effect during
the term of this Agreement.  THIS WRITTEN
CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.


 


Several Obligations; Benefits
of this Agreement.  The respective obligations of the Lenders
hereunder are several and not joint and no Lender shall be the partner or agent
of any other (except to the extent to which the Administrative Agent is
authorized to act as such).  The failure
of any Lender to perform any of its obligations hereunder shall not relieve any
other Lender from any of its obligations hereunder.  This Agreement shall not be construed so as to confer any right
or benefit upon any Person other than the parties to this Agreement and their
respective successors and assigns, provided,
however, that the parties hereto expressly agree that the Arranger
shall enjoy the benefits of the provisions of Sections 0, 0 and 0 to the
extent specifically set forth therein and shall have the right to enforce such
provisions on its own behalf and in its own name to the same extent as if it
were a party to this Agreement.


 


Expenses; Indemnification.  (i) the Borrowers shall reimburse the Administrative Agent and
the Arranger for any costs and out-of-pocket expenses (including attorneys’
fees and time charges of attorneys for the Administrative Agent) paid or
incurred by the Administrative Agent or the Arranger in connection with the
investigation, preparation, negotiation, execution, delivery, syndication,
distribution (including, without limitation, via the internet), review,
amendment, modification, and administration of the Loan Documents.  The Borrowers also agree to reimburse the
Administrative Agent, the Arranger and the Lenders for any costs and
out-of-pocket expenses (including attorneys’ fees and time charges of attorneys
for the Administrative Agent, the Arranger and the Lenders, the Arranger or the
Lenders) paid or incurred by the Administrative Agent, the Arranger or any Lender
in connection with the collection and enforcement of the Loan Documents or in
connection with any refinancing or restructuring of the credit arrangements
provided hereunder in the nature of a “work-out” or pursuant to any insolvency
or bankruptcy cases or proceedings. 
Expenses being reimbursed by the Borrowers under this Section include,
without limitation, costs and expenses incurred in connection with the Reports
described in the following sentence. 
The Borrowers acknowledge that from time to time Bank One may prepare
and may distribute to the Lenders (but shall have no obligation or duty to
prepare or to distribute to the Lenders) certain audit reports or Reserve
Reports (the “Reports”) pertaining to the Credit Parties’ assets for internal
use by Bank One from information furnished to it by or on behalf of the
Borrowers.


 


(ii)           EACH BORROWER HEREBY FURTHER, JOINTLY AND SEVERALLY,
AGREES TO INDEMNIFY THE ADMINISTRATIVE AGENT, THE ARRANGER, EACH LENDER, THEIR
RESPECTIVE AFFILIATES, AND EACH OF THEIR DIRECTORS, OFFICERS AND EMPLOYEES
AGAINST ALL LOSSES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, LIABILITIES AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, ALL


 


52

















 


EXPENSES
OF LITIGATION OR PREPARATION THEREFOR WHETHER OR NOT THE ADMINISTRATIVE AGENT,
THE ARRANGER, ANY LENDER OR ANY AFFILIATE IS A PARTY THERETO) WHICH ANY OF THEM
MAY PAY OR INCUR ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, THE TRANSACTIONS CONTEMPLATED HEREBY OR THE DIRECT OR INDIRECT
APPLICATION OR PROPOSED APPLICATION OF THE PROCEEDS OF ANY LOAN HEREUNDER
EXCEPT TO THE EXTENT THAT THEY ARE DETERMINED IN A FINAL NON-APPEALABLE
JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PARTY SEEKING INDEMNIFICATION.   THE OBLIGATIONS OF EACH BORROWER UNDER THIS
SECTION 0 SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.


 


Numbers of Documents.  All statements, notices, closing documents, and requests
hereunder shall be furnished to the Administrative Agent with sufficient
counterparts so that the Administrative Agent may furnish one to each of the
Lenders.


 


Accounting.  Except as provided to the contrary herein,
all accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles.


 


Severability of Provisions.  Any provision in any Loan Document that is held to be
inoperative, unenforceable, or invalid in any jurisdiction shall, as to that
jurisdiction, be inoperative, unenforceable, or invalid without affecting the
remaining provisions in that jurisdiction or the operation, enforceability, or
validity of that provision in any other jurisdiction, and to this end the
provisions of all Loan Documents are declared to be severable.


 


Nonliability of Lenders.  The relationship between the Borrowers on the one hand and the
Lenders and the Administrative Agent on the other hand shall be solely that of
borrower and lender.  Neither the Administrative
Agent, the Arranger nor any Lender shall have any fiduciary responsibilities to
any Borrower.  Neither the
Administrative Agent, the Arranger nor any Lender undertakes any responsibility
to any Borrower to review or inform any Borrower of any matter in connection
with any phase of any Borrower’s business or operations.  Each Borrower agrees that neither the
Administrative Agent, the Arranger nor any Lender shall have liability to any
Borrower (whether sounding in tort, contract or otherwise) for losses suffered
by any Borrower in connection with, arising out of, or in any way related to,
the transactions contemplated and the relationship established by the Loan
Documents, or any act, omission or event occurring in connection therewith,
unless it is determined in a final non-appealable judgment by a court of
competent jurisdiction that such losses resulted from the gross negligence or
willful misconduct of the party from which recovery is sought.  Neither the Administrative Agent, the
Arranger nor any Lender shall have any liability with respect to, and each
Borrower hereby waives, releases and agrees not to sue for, any special,
indirect, consequential or punitive damages suffered by any Borrower in
connection with, arising out of, or in any way related to the Loan Documents or
the transactions contemplated thereby.


 


Confidentiality.  Each Lender agrees to hold any confidential information which it
may receive from any Borrower pursuant to this Agreement in confidence, except
for disclosure (i) to its Affiliates and to other Lenders and their
respective Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to such Lender or to a Transferee, (iii) to
regulatory officials, (iv) to any Person as requested pursuant to or as
required by law, regulation, or legal process, (v) to any Person in
connection with any legal proceeding to which such Lender is a party,
(vi) to such Lender’s direct or indirect contractual counterparties in
swap agreements or to legal counsel, accountants and other professional
advisors to such counterparties, (vii) permitted by Section 0 and
(viii) to rating agencies if requested or required by such


 


53

















 


agencies in connection with a rating relating to the Advances
hereunder. Notwithstanding anything herein to the contrary, confidential
information shall not include, and each Lender (and each employee,
representative or other agent of any Lender) may disclose to any and all
Persons, without limitation of any kind, the “tax treatment” and “tax
structure” (in each case, within the meaning of Treasury Regulation
Section 1.6011-4) of the transactions contemplated hereby and all
materials of any kind (including opinions or other tax analyses) that are or
have been provided to such Lender relating to such tax treatment or tax
structure; provided that with
respect to any document or similar item that in either case contains
information concerning such tax treatment or tax structure of the transactions
contemplated hereby as well as other information, this sentence shall only
apply to such portions of the document or similar item that relate to such tax
treatment or tax structure.


 


Nonreliance.  Each Lender hereby represents that it is not
relying on or looking to any margin stock (as defined in Regulation U of the
Board of Governors of the Federal Reserve System) for the repayment of the
Loans provided for herein.


 


Disclosure.  Each Borrower and each Lender hereby
acknowledges and agrees that Bank One and/or its Affiliates from time to time
may hold investments in, make other loans to or have other relationships with
any one or more of the Borrowers and their Affiliates.


 


USA PATRIOT ACT NOTIFICATION.  The following notification is provided to each Borrower pursuant
to Section 326 of the USA Patriot Act of 2001, 31 U.S.C.
Section 5318:


 


IMPORTANT
INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT.  To help the government fight the funding of
terrorism and money laundering activities, Federal law requires all financial
institutions to obtain, verify, and record information that identifies each
person or entity that opens an account, including any deposit account, treasury
management account, loan, other extension of credit, or other financial
services product.  What this means for
the Borrowers: When any Borrower opens an account, if such Borrower is an
individual, the Administrative Agent and the Lenders will ask for such
Borrower’s name, residential address, tax identification number, date of birth,
and other information that will allow the Administrative Agent and the Lenders
to identify such Borrower, and, if such Borrower is not an individual, the
Administrative Agent and the Lenders will ask for such Borrower’s name, tax
identification number, business address, and other information that will allow
the Administrative Agent and the Lenders to identify such Borrower.  The Administrative Agent and the Lenders may
also ask if such Borrower is an individual, to see such Borrower’s driver’s
license or other identifying documents, and, if such Borrower is not an
individual, to see such Borrower’s Organizational Documents or other
identifying documents.


 


ADMINISTRATIVE AGENT


 


Appointment; Nature of
Relationship.  Bank One, NA is hereby appointed by each of
the Lenders as its contractual representative (herein referred to as the
“Administrative Agent”) hereunder and under each other Loan Document, and each
of the Lenders irrevocably authorizes the Administrative Agent to act as the
contractual representative of such Lender with the rights and duties expressly
set forth herein and in the other Loan Documents.  The Administrative Agent agrees to act as such contractual
representative upon the express conditions contained in this Article XI.  Notwithstanding the use of the defined term “Administrative
Agent,” it is expressly understood and agreed that the Administrative Agent
shall not have any fiduciary responsibilities to any Lender by reason of this
Agreement or any other Loan Document and that the Administrative Agent is
merely acting as the contractual representative of the Lenders with only those
duties as are expressly set forth in this Agreement and the other Loan


 


54

















 


Documents.  In its capacity as
the Lenders’ contractual representative, the Administrative Agent (i) does
not hereby assume any fiduciary duties to any of the Lenders, (ii) is a
“representative” of the Lenders within the meaning of the term “Secured Party”
as defined in the Texas Uniform Commercial Code, and (iii) is acting as an
independent contractor, the rights and duties of which are limited to those
expressly set forth in this Agreement and the other Loan Documents.  Each of the Lenders hereby agrees to assert
no claim against the Administrative Agent on any agency theory or any other
theory of liability for breach of fiduciary duty, all of which claims each
Lender hereby waives.


 


Powers.  The Administrative Agent shall have and may
exercise such powers under the Loan Documents as are specifically delegated to
the Administrative Agent by the terms of each thereof, together with such
powers as are reasonably incidental thereto. 
The Administrative Agent shall have no implied duties to the Lenders, or
any obligation to the Lenders to take any action thereunder except any action
specifically provided by the Loan Documents to be taken by the Administrative
Agent.  None of the Syndication Agent,
the Co-Agent, the Arranger nor the Sole Bookrunner shall have the
responsibilities as an Agent hereunder.


 


General Immunity.  Neither the Administrative Agent nor any of its directors,
officers, agents or employees shall be liable to any Credit Party, the Lenders
or any Lender for any action taken or omitted to be taken by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith except to the extent such action or inaction is determined in a final
non-appealable judgment by a court of competent jurisdiction to have arisen
from the gross negligence or willful misconduct of such Person.


 


No Responsibility for Loans,
Recitals, etc.  Neither the Administrative Agent nor any of its directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into, or verify (a) any statement, warranty or representation
made in connection with any Loan Document or any borrowing hereunder; (b) the
performance or observance of any of the covenants or agreements of any obligor
under any Loan Document, including, without limitation, any agreement by an
obligor to furnish information directly to each Lender; (c) the satisfaction of
any condition specified in Article IV, except receipt of items required to be
delivered solely to the Administrative Agent; (d) the existence or possible
existence of any Default or Unmatured Default; (e) the validity,
enforceability, effectiveness, sufficiency or genuineness of any Loan Document
or any other instrument or writing furnished in connection therewith; (f) the
value, sufficiency, creation, perfection or priority of any Lien in any
collateral security; or (g) the financial condition of any Borrower or any
Guarantor of any of the Obligations or of any of such Borrower’s or any such
Guarantor’s respective Subsidiaries. 
The Administrative Agent shall have no duty to disclose to the Lenders
information that is not required to be furnished by a Borrower to the
Administrative Agent at such time, but is voluntarily furnished by any Borrower
to the Administrative Agent (either in its capacity as the Administrative Agent
or in its individual capacity).


 


Action on Instructions of
Lenders.  The Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and under
any other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders.  The Lenders hereby acknowledge that the
Administrative Agent shall be under no duty to take any discretionary action
permitted to be taken by it pursuant to the provisions of this Agreement or any
other Loan Document unless it shall be requested in writing to do so by the
Required Lenders.  The Administrative
Agent shall be fully justified in failing or refusing to take any action
hereunder and under any other Loan Document unless it shall first be
indemnified to its satisfaction by the Lenders pro rata against any and all
liability, cost and expense that it may incur by reason of taking or continuing
to take any such action.


 


55



















 


Employment of Agents and
Counsel.  The Administrative Agent may execute any of
its duties as the Administrative Agent hereunder and under any other Loan
Document by or through employees, agents, and attorneys-in-fact and shall not
be answerable to the Lenders, except as to money or securities received by it
or its authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.  The Administrative Agent shall be entitled
to advice of counsel concerning the contractual arrangement between the
Administrative Agent and the Lenders and all matters pertaining to the
Administrative Agent’s duties hereunder and under any other Loan Document.  EACH
LENDER ACKNOWLEDGES THAT WINSTEAD SECHREST & MINICK P.C. IS COUNSEL FOR
BANK ONE, IN ITS CAPACITY AS THE ADMINISTRATIVE AGENT AND AS A LENDER, AND THAT
SUCH FIRM DOES NOT REPRESENT ANY OF THE OTHER LENDERS IN CONNECTION WITH THIS
TRANSACTION.


 


Reliance on Documents;
Counsel.  The Administrative Agent shall be entitled
to rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and, in
respect to legal matters, upon the opinion of counsel selected by the
Administrative Agent, which counsel may be employees of the Administrative
Agent.


 


ADMINISTRATIVE AGENT’S REIMBURSEMENT AND INDEMNIFICATION. 
THE LENDERS AGREE TO REIMBURSE AND INDEMNIFY THE ADMINISTRATIVE AGENT
RATABLY IN PROPORTION TO THEIR RESPECTIVE COMMITMENTS (OR, IF THE COMMITMENTS
HAVE BEEN TERMINATED, IN PROPORTION TO THEIR COMMITMENTS IMMEDIATELY PRIOR TO
SUCH TERMINATION)  (I) FOR ANY
AMOUNTS NOT REIMBURSED BY THE BORROWERS FOR WHICH THE ADMINISTRATIVE AGENT IS
ENTITLED TO REIMBURSEMENT BY THE BORROWERS UNDER THE LOAN DOCUMENTS,
(II) FOR ANY OTHER EXPENSES INCURRED BY THE ADMINISTRATIVE AGENT ON BEHALF
OF THE LENDERS, IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY,
ADMINISTRATION AND ENFORCEMENT OF THE LOAN DOCUMENTS (INCLUDING, WITHOUT
LIMITATION, FOR ANY EXPENSES INCURRED BY THE ADMINISTRATIVE AGENT IN CONNECTION
WITH ANY DISPUTE BETWEEN THE ADMINISTRATIVE AGENT AND ANY LENDER OR BETWEEN TWO
OR MORE OF THE LENDERS) AND (III) FOR ANY LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR
DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER WHICH MAY BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT IN ANY WAY RELATING TO
OR ARISING OUT OF THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT DELIVERED IN
CONNECTION THEREWITH OR THE TRANSACTIONS CONTEMPLATED THEREBY (INCLUDING,
WITHOUT LIMITATION, FOR ANY SUCH AMOUNTS INCURRED BY OR ASSERTED AGAINST THE
ADMINISTRATIVE AGENT IN CONNECTION WITH ANY DISPUTE BETWEEN THE ADMINISTRATIVE
AGENT AND ANY LENDER OR BETWEEN TWO OR MORE OF THE LENDERS), OR THE ENFORCEMENT
OF ANY OF THE TERMS OF THE LOAN DOCUMENTS OR OF ANY SUCH OTHER DOCUMENTS, PROVIDED THAT NO LENDER SHALL BE LIABLE
FOR ANY OF THE FOREGOING TO THE EXTENT ANY OF THE FOREGOING IS FOUND IN A FINAL
NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED
FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE ADMINISTRATIVE
AGENT.  THE OBLIGATIONS OF THE LENDERS
UNDER THIS SECTION 0 SHALL SURVIVE PAYMENT OF THE OBLIGATIONS AND
TERMINATION OF THIS AGREEMENT.


 


56

















 


Notice of Default.  The Administrative
Agent shall not be deemed to have knowledge or notice of the occurrence of any
Default or Unmatured Default hereunder unless the Administrative Agent has
received written notice from a Lender or the Borrowers referring to this
Agreement describing such Default or Unmatured Default and stating that such
notice is a “notice of default”.  In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give prompt notice thereof to the Lenders.


 


Rights as a Lender.  In the event the Administrative Agent is a Lender, the
Administrative Agent shall have the same rights and powers hereunder and under
any other Loan Document with respect to its Commitment and its Loans as any
Lender and may exercise the same as though it were not the Administrative
Agent, and the term “Lender” or “Lenders” shall, at any time when the
Administrative Agent is a Lender, unless the context otherwise indicates,
include the Administrative Agent in its individual capacity.  The Administrative Agent and its Affiliates
may accept deposits from, lend money to, and generally engage in any kind of
trust, debt, equity or other transaction, in addition to those contemplated by
this Agreement or any other Loan Document, with any Borrower, the Guarantors or
any of their respective Subsidiaries in which such Borrower, such Guarantor or
such Subsidiary is not restricted hereby from engaging with any other
Person.  The Administrative Agent, in
its individual capacity, is not obligated to remain a Lender.


 


Lender Credit Decision.  Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent, the Arranger or any other Lender and
based on the financial statements prepared by the Borrowers and the Guarantors
and such other documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement and the other
Loan Documents.  Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent, the Arranger or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.


 


Successor Administrative
Agent.  The Administrative Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrowers, such
resignation to be effective upon the appointment of a successor Administrative
Agent or, if no successor Administrative Agent has been appointed, forty-five
days after the retiring Administrative Agent gives notice of its intention to
resign.  The Administrative Agent may be
removed at any time with or without cause by written notice received by the
Administrative Agent from the Required Lenders, such removal to be effective on
the date specified by the Required Lenders. 
Upon any such resignation or removal, the Required Lenders shall have
the right to appoint, on behalf of the Borrowers and the Lenders, a successor
Administrative Agent subject to the approval of the Borrowers, such approval
not to be unreasonably withheld; provided
that no Borrower shall have the right to approve any successor Administrative
Agent appointed during the continuance of any Default.  If no successor Administrative Agent shall
have been so appointed by the Required Lenders within thirty days after the
resigning Administrative Agent’s giving notice of its intention to resign, then
the resigning Administrative Agent may appoint, on behalf of the Borrowers and
the Lenders, a successor Administrative Agent. 
Notwithstanding the previous sentence, the Administrative Agent may at
any time without the consent of any Borrower or any Lender, appoint any of its
Affiliates which is a commercial bank as a successor Administrative Agent
hereunder.  If the Administrative Agent
has resigned or been removed and no successor Administrative Agent has been
appointed, the Lenders may perform all the duties of Administrative Agent
hereunder and the Borrowers shall make all payments in respect of the
Obligations to the applicable Lender and for all other purposes shall deal
directly with the Lenders.  No successor
Administrative Agent shall be deemed to be appointed hereunder until such
successor Administrative Agent has accepted the appointment.  Any such successor Administrative Agent
shall be a commercial bank having capital and retained earnings of at least
$100,000,000.  Upon the acceptance of
any appointment as the Administrative Agent hereunder by a


 


57

















 


successor Administrative Agent, such successor Administrative Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the resigning or removed Administrative Agent.  Upon the effectiveness of the resignation or
removal of the Administrative Agent, the resigning or removed Administrative
Agent shall be discharged from its duties and obligations hereunder and under
the Loan Documents.  After the
effectiveness of the resignation or removal of an Administrative Agent, the
provisions of this Article XI shall continue in effect for the benefit of such
Administrative Agent in respect of any actions taken or omitted to be taken by
it while it was acting as the Administrative Agent hereunder and under the
other Loan Documents.  In the event that
there is a successor to the Administrative Agent by merger, or the
Administrative Agent assigns its duties and obligations to an Affiliate
pursuant to this Section 0, then the term “Prime Rate” as used in this
Agreement shall mean the prime rate, base rate or other analogous rate of the
new Administrative Agent.


 


Administrative Agent and
Arranger Fees.  Each Borrower, jointly and severally, agrees
to pay to the Administrative Agent and the Arranger, for their respective
accounts, the fees agreed to by the Borrowers, the Administrative Agent and the
Arranger pursuant to that certain letter agreement dated on or about April 30,
2004, or as otherwise agreed from time to time.


 


Delegation to Affiliates.  The Borrowers and the Lenders agree that the Administrative Agent
may delegate any of its duties under this Agreement to any of its
Affiliates.  Any such Affiliate (and
such Affiliate’s directors, officers, agents and employees) which performs
duties in connection with this Agreement shall be entitled to the same benefits
of the indemnification, waiver and other protective provisions to which the
Administrative Agent is entitled under Articles X and XI.


 


Execution of Collateral
Documents.  The Lenders hereby empower and authorize the
Administrative Agent and the Collateral Agent to execute and deliver to the
Borrowers on their behalf the Collateral Documents and all related financing
statements and any financing statements, agreements, documents or instruments
as shall be necessary or appropriate to effect the purposes of the Collateral
Documents.


 


Collateral Releases.  The Lenders hereby empower and authorize the Administrative Agent
and the Collateral Agent to execute and deliver to the Credit Parties on their
behalf any agreements, documents or instruments as shall be necessary or
appropriate to effect any releases of Collateral which shall be permitted by
the terms hereof or of any other Loan Document (including the Collateral Agency
Agreement), including releases required pursuant to sales of Collateral
permitted under Section 0 and Section 2.4 of the Collateral Agency
Agreement, or which shall otherwise have been approved by the Required Lenders
in writing.


 


SETOFF; RATABLE PAYMENTS


 


Setoff.  In addition to, and without limitation of,
any rights of the Lenders under applicable law, if any Credit Party becomes
insolvent, however evidenced, or any Default occurs, any and all deposits
(including all account balances, whether provisional or final and whether or
not collected or available) and any other Indebtedness at any time held or
owing by any Lender or any Affiliate of any Lender to or for the credit or
account of any Credit Party may be offset and applied toward the payment of the
Obligations owing to such Lender, whether or not the Obligations, or any part
thereof, shall then be due.


 


Ratable Payments.  If any Lender, whether by setoff or otherwise, has payment made
to it upon its Loans (other than payments received pursuant to Section 0,
0, or 0) in a greater proportion than that received by any other Lender, such
Lender agrees, promptly upon demand, to purchase a portion of the


 


58

















 


Loans held by the other Lenders so that after such purchase each Lender
will hold its ratable proportion of Loans. 
If any Lender, whether in connection with setoff or amounts which might
be subject to setoff or otherwise, receives collateral or other protection for
its Obligations or such amounts which may be subject to setoff, such Lender
agrees, promptly upon demand, to take such action necessary such that all
Lenders share in the benefits of such collateral ratably in proportion to their
Loans.  In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.


 


BENEFIT
OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS


 


Successors and Assigns.  The terms and provisions of the Loan Documents shall be binding
upon and inure to the benefit of the Borrowers, Guarantors, the Agents and the
Lenders and their respective successors and assigns permitted hereby, except
that (i) the Borrowers and the Guarantors shall not have the right to
assign any of their rights or obligations under the Loan Documents without the
prior written consent of each Lender, (ii) any assignment by any Lender
must be made in compliance with Section 0, and (iii) any transfer by
Participation must be made in compliance with Section 0.  Any attempted assignment or transfer by any
party not made in compliance with this Section 0 shall be null and void,
unless such attempted assignment or transfer is treated as a participation in
accordance with Section 0.  The
parties to this Agreement acknowledge that clause (ii) of this
Section 0 relates only to absolute assignments and this Section 0
does not prohibit assignments creating security interests, including, without
limitation, (x) any pledge or assignment by any Lender of all or any portion of
its rights under this Agreement and any Note to a Federal Reserve Bank or (y)
in the case of a Lender which is a Fund, any pledge or assignment of all or any
portion of its rights under this Agreement and any Note to its trustee in
support of its obligations to its trustee; provided,
however, that no such pledge or assignment creating a security
interest shall release the transferor Lender from its obligations hereunder
unless and until the parties thereto have complied with the provisions of
Section 0.  The Administrative
Agent may treat the Person which made any Loan or which holds any Note as the
owner thereof for all purposes hereof unless and until such Person complies
with Section 0; provided, however,
that the Administrative Agent may in its discretion (but shall not be required
to) follow instructions from the Person which made any Loan or which holds any
Note to direct payments relating to such Loan or Note to another Person.  Any assignee of the rights to any Loan or
any Note agrees by acceptance of such assignment to be bound by all the terms
and provisions of the Loan Documents. 
Any request, authority or consent of any Person, who at the time of
making such request or giving such authority or consent is the owner of the
rights to any Loan (whether or not a Note has been issued in evidence thereof),
shall be conclusive and binding on any subsequent holder or assignee of the
rights to such Loan.


 


Participations.


 


Permitted Participants; Effect.  Any Lender may at any time sell to one or more banks or other
entities (“Participants”) participating interests in any Loan owing to such
Lender, any Note held by such Lender, any Commitment of such Lender or any
other interest of such Lender under the Loan Documents.  In the event of any such sale by a Lender of
participating interests to a Participant, such Lender’s obligations under the
Loan Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, such Lender shall remain the owner of its Loans and the holder of
any Note issued to it in evidence thereof for all purposes under the Loan
Documents, all amounts payable by the Borrowers under this Agreement shall be
determined as if such Lender had not sold such participating interests, and the
Borrowers and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under the Loan Documents.


 


59

















 


Voting Rights. 
Each Lender shall retain the sole right to approve, without the consent
of any Participant, any amendment, modification or waiver of any provision of
the Loan Documents other than any amendment, modification or waiver with
respect to any Loan or Commitment in which such Participant has an interest
which would require consent of all of the Lenders pursuant to the terms of
Section 0 or of any other Loan Document.


 


Benefit of Certain Provisions.  The Borrowers agree that each Participant shall be deemed to have
the right of setoff provided in Section 0 in respect of its participating
interest in amounts owing under the Loan Documents to the same extent as if the
amount of its participating interest were owing directly to it as a Lender
under the Loan Documents, provided that each Lender shall retain the
right of setoff provided in Section 0 with respect to the amount of
participating interests sold to each Participant.  The Lenders agree to share with each Participant, and each
Participant, by exercising the right of setoff provided in Section 0,
agrees to share with each Lender, any amount received pursuant to the exercise
of its right of setoff, such amounts to be shared in accordance with
Section 0 as if each Participant were a Lender.  Each Borrower further agrees that each Participant shall be
entitled to the benefits of Sections 0, 0, 0 and 0 to the same extent as if it
were a Lender and had acquired its interest by assignment pursuant to
Section 0, provided that (i) a Participant shall not be entitled
to receive any greater payment under Section 0 or 0 than the Lender who
sold the participating interest to such Participant would have received had it
retained such interest for its own account, unless the sale of such interest to
such Participant is made with the prior written consent of the Borrowers,
and  (ii) any Participant not
incorporated under the laws of the United States of America or any State  thereof, agrees to comply with the
provisions of Section 0 to the same extent as if it were a Lender.


 


Assignments.


 


Permitted Assignments.  Any Lender may at any time assign to one or more banks or other
entities (“Purchasers”) all or any part of its rights and obligations under the
Loan Documents.  Such assignment shall
be substantially in the form of Exhibit C or in such other form as may be
agreed to by the parties thereto.  Each
such assignment with respect to a Purchaser which is not a Lender or an
Affiliate of a Lender or an Approved Fund shall either be in an amount equal to
the entire applicable Commitment and Loans of the assigning Lender or  (unless each of the Borrowers and the
Administrative Agent otherwise consents) be in an aggregate amount not less
than $3,000,000.  The amount of the
assignment shall be based on the Commitment or outstanding Loans (if the
Commitment has been terminated) subject to the assignment, determined as of the
date of such assignment or as of the “Trade Date,” if the “Trade Date” is
specified in the assignment.


 


Consents.  The
consent of the Borrowers shall be required prior to an assignment becoming
effective unless the Purchaser is a Lender, an Affiliate of a Lender or an
Approved Fund; provided that the consent of the Borrowers shall not be
required if a Default has occurred and is continuing.  The consent of the Administrative Agent shall be required prior
to an assignment becoming effective unless the Purchaser is a Lender, an
Affiliate of a Lender or an Approved Fund. 
Any consent required under this Section 0 shall not be unreasonably
withheld or delayed.


 


Effect; Effective Date.  Upon (i) delivery to the Administrative Agent of an assignment,
together with any consents required by Sections 0 and 0, and (ii) payment
of a $3,500 fee by the assigning Lender or Purchaser to the Administrative
Agent for processing such assignment (unless such fee is waived by the
Administrative Agent), such assignment shall become effective on the effective
date specified in such assignment.  The
assignment shall contain a representation


 


60

















 


by
the Purchaser to the effect that none of the consideration used to make the
purchase of the Commitment and Loans under the applicable assignment agreement
constitutes “plan assets” as defined under ERISA and that the rights and
interests of the Purchaser in and under the Loan Documents will not be “plan
assets” under ERISA.  On and after the
effective date of such assignment, such Purchaser shall for all purposes be a
Lender party to this Agreement and any other Loan Document executed by or on
behalf of the Lenders and shall have all the rights and obligations of a Lender
under the Loan Documents, to the same extent as if it were an original party
thereto, and the transferor Lender shall be released with respect to the
Commitment and Loans assigned to such Purchaser without any further consent or
action by the Borrowers, the Lenders or the Administrative Agent.  In the case of an assignment covering all of
the assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a Lender hereunder but shall continue to be entitled to the
benefits of, and subject to, those provisions of this Agreement and the other Loan
Documents which survive payment of the Obligations and termination of the
applicable agreement.  Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does
not comply with this Section 0 shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with Section 0. 
Upon the consummation of any assignment to a Purchaser pursuant to this
Section 0, the transferor Lender, the Administrative Agent and the
Borrowers shall, if the transferor Lender or the Purchaser desires that its
Loans be evidenced by Notes, make appropriate arrangements so that new Notes
or, as appropriate, replacement Notes are issued to such transferor Lender and
new Notes or, as appropriate, replacement Notes, are issued to such Purchaser,
in each case in principal amounts reflecting their respective Commitments, as
adjusted pursuant to such assignment.


 


Register.  The
Administrative Agent, acting solely for this purpose as an agent of the
Borrowers, shall maintain at one of its offices in Chicago, Illinois, a copy of
each Assignment and Assumption delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amounts of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”). 
The entries in the Register shall be conclusive, and the Borrowers, the
Administrative Agent and the Lenders may treat each Person whose name is recorded
in the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for
inspection by the Borrowers at any reasonable time and from time to time upon
reasonable prior notice.


 


Dissemination of Information.  The Borrowers authorize each Lender to disclose to any
Participant or Purchaser or any other Person acquiring an interest in the Loan
Documents by operation of law (each a “Transferee”) and any prospective
Transferee any and all information in such Lender’s possession concerning the
creditworthiness of the Borrowers and their Subsidiaries, including without
limitation any information contained in any Report; provided that each Transferee and prospective Transferee
agrees to be bound by Section 0 of this Agreement.


 


NOTICES


 


Notices.  Except as otherwise permitted by
Section 0 with respect to borrowing notices, all notices, requests and
other communications to any party hereunder shall be in writing (including
electronic transmission, facsimile transmission or similar writing) and shall
be given to such party: (a) in the case of the Borrowers, to the Borrower
Representative, at its address or facsimile number set forth on the signature
pages hereof, (b) in the case of the Guarantors, at its address or facsimile
number set forth


 


61

















 


on the signature pages hereof, (c) in the case of the Administrative
Agent, at its address or facsimile number set forth on the signature pages
hereof, (d) in the case of any Lender, at its address or facsimile number set
forth on Annex A attached hereto or (e) in the case of any other party, at such
other address or facsimile number as such party may hereafter specify for the
purpose by notice to the Administrative Agent and the Borrowers in accordance
with the provisions of this Section 0. 
Each such notice, request or other communication shall be effective
(i) if given by facsimile transmission, when transmitted to the facsimile
number specified in this Section and confirmation of receipt is received,
(ii) if given by mail, 72 hours after such communication is deposited in
the mails with first class postage prepaid, addressed as aforesaid, or
(iii) if given by any other means, when delivered (or, in the case of
electronic transmission, received) at the address specified in this Section; provided that notices to the
Administrative Agent under Article II shall not be effective until received.


 


Change of Address.  The Borrower Representative, the Administrative Agent and any
Lender may each change the address for service of notice upon it by a notice in
writing to the other parties hereto.


 


COUNTERPARTS


 


Counterparts.  This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one agreement,
and any of the parties hereto may execute this Agreement by signing any such
counterpart; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. 
This Agreement shall be effective when it has been executed by the
Borrowers, the Guarantors, the Administrative Agent and the Lenders and each
party has notified the Administrative Agent by facsimile transmission or
telephone that it has taken such action.


 


CHOICE OF LAW; CONSENT TO
JURISDICTION; WAIVER OF JURY TRIAL


 


CHOICE OF LAW.  THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, BUT OTHERWISE
WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS) OF THE STATE OF TEXAS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.


 


CONSENT TO
JURISDICTION.  EACH BORROWER AND EACH
GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE
COURTS OF ANY UNITED STATES FEDERAL OR TEXAS STATE COURT SITTING IN DALLAS,
TEXAS, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS
(OTHER THAN THOSE CONTAINING AN EXPRESS CONSENT TO ANOTHER JURISDICTION) AND
EACH BORROWER AND EACH GUARANTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR
THAT SUCH COURT IS AN INCONVENIENT FORUM. 
NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY
LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER OR ANY GUARANTOR IN THE COURTS
OF ANY OTHER JURISDICTION.  ANY JUDICIAL
PROCEEDING BY ANY


 


62

















 


BORROWER OR ANY GUARANTOR AGAINST THE ADMINISTRATIVE
AGENT OR ANY LENDER OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A
COURT IN DALLAS, TEXAS.


 


WAIVER OF
JURY TRIAL.  EACH BORROWER, EACH GUARANTOR,
THE ADMINISTRATIVE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.


 


63

















 


IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date first above written.


 


	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  CLAYTON WILLIAMS ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/

  
	
   

  	
   

  	
  Mel G. Riggs

  
	
   

  	
   

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CWEI-SWR, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/

  
	
   

  	
   

  	
  Mel G. Riggs

  
	
   

  	
   

  	
  Vice President and
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Borrower
  Representative:

  
	
   

  	
  Clayton Williams
  Energy, Inc.

  
	
   

  	
  Six Desta Drive, Suite
  6500

  
	
   

  	
  Midland, Texas  79705

  
	
   

  	
  Attention:  Mel G. Riggs

  
	
   

  	
  Telephone:  (915) 688-3431

  
	
   

  	
  Facsimile:  (915) 688-3247

  



 

















 


	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  WARRIOR GAS CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/

  
	
   

  	
   

  	
  Mel G. Riggs

  
	
   

  	
   

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CWEI ACQUISITIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/

  
	
   

  	
   

  	
  Mel G. Riggs

  
	
   

  	
   

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ROMERE PASS ACQUISITION L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/

  
	
   

  	
   

  	
  Mel G. Riggs, Vice
  President and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  CWEI ROMERE PASS ACQUISITIONS CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/

  
	
   

  	
   

  	
  Mel G. Riggs, Vice
  President and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  c/o Clayton Williams
  Energy, Inc.

  
	
   

  	
  Six Desta Drive, Suite
  6500

  
	
   

  	
  Midland, Texas  79705

  
	
   

  	
  Attention:  Mel G. Riggs

  
	
   

  	
  Telephone:  (915) 688-3431

  
	
   

  	
  Facsimile:  (915) 688-3247

  



 

















 


 


	
   

  	
  BANK ONE, NA,

  
	
   

  	
  Individually and as the
  Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
  Wm. Mark Cranmer

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Bank One, NA

  
	
   

  	
  Mail Code IL1-0634

  
	
   

  	
  1 Bank One Plaza

  
	
   

  	
  Chicago, Illinois
  60670-0634

  
	
   

  	
  Attention:  Jim Moore

  
	
   

  	
  Telephone: (312)
  385-7057

  
	
   

  	
  Facsimile: (312)
  732-4840

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
  Bank One, NA

  
	
   

  	
  1717 Main Street

  
	
   

  	
  Fourth Floor

  
	
   

  	
  Dallas, Texas 75201

  
	
   

  	
  Attention:

  	
  Wm. Mark Cranmer,
  Director

  
	
   

  	
   

  	
  Capital Markets

  
	
   

  	
  Telephone: (214)
  290-2212

  
	
   

  	
  Facsimile: (214)
  290-2332

  
				



 

















 


	
   

  	
  UNION BANK OF CALIFORNIA, N.A.,

  
	
   

  	
  a national banking association

  
	
   

  	
  as a Lender and as the
  Syndication Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/

  
	
   

  	
  Name:

  	
   

  	
  Kimberly Coil

  
	
   

  	
  Title:

  	
   

  	
  Assistant Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/

  
	
   

  	
  Name:

  	
   

  	
  Randall Osterberg

  
	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  
							



 

















 


	
   

  	
  BANK OF SCOTLAND

  
	
   

  	
  as a Lender and as the
  Co-Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/

  
	
   

  	
  Name:

  	
   

  	
  Karen Workman

  
	
   

  	
  Title:

  	
   

  	
  Assistant Vice
  President

  
						



 

















 


ANNEX A


 


COMMITMENTS


 


	
  LENDER

  	
   

  	
  COMMITMENT

  	
   

  
	
  Bank One, NA

  1 Bank One Plaza

  Mail Code IL1-0634

  Chicago, Illinois 60670-0634

  	
   

  	
   

  	
   

  	
   

  
	
  Attention:

  	
  Jim Moore

  	
   

  	
   

  	
   

  	
   

  
	
  Telephone:

  	
  312.385.7057

  	
   

  	
   

  	
   

  	
   

  
	
  Facsimile:

  	
  312.385.7096

  	
   

  	
  $

  	
  35,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Union Bank
  of California, N.A.

  500 North Akard Street, Suite 4200

  Dallas, Texas  75201

  Attention:  John Clark

  Telephone:  214.922.4203

  |Facsimile:  214.922.4209

  	
   

  	
  $

  	
  20,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Bank of
  Scotland

  565 Fifth Avenue

  New York, New York 10017

  Attention:  Shirley Vargas

  Telephone:  212.450.0875

  Facsimile:  212.479.2807

  	
   

  	
  $

  	
  20,000,000

  	
   

  



 

















 


PRICING SCHEDULE

APPLICABLE MARGIN




	
  Aggregate Outstanding

  Principal Balance of the Loans

  	
   

  	
  Applicable
  Margin

  for Floating Rate

  Loans(1)

  	
   

  	
  Applicable
  Margin for

  Eurodollar Loans(1)

  	
   

  
	
  Greater than $40,000,000

  	
   

  	
  3.50

  	
  %

  	
  5.00

  	
  %

  
	
  Equal to or less than $40,000,000

  	
   

  	
  2.50

  	
  %

  	
  4.00

  	
  %

  



 












(1)  Unless and
until the first day of the first Fiscal Quarter following the date on which the
aggregate outstanding principal balance of the Loans is equal to or less than
$40,000,000, the Applicable Margin for Floating Rate Loans and Eurodollar Loans
shall each increase, on a cumulative basis, by .50% per annum on the first day
of each Fiscal Quarter occurring after the Closing Date.


 

















 


EXHIBIT A-1

FORM OF BORROWER’S COUNSEL OPINION


 

















 


EXHIBIT A-2

FORM OF COLLATERAL AGENT’S OPINION


 

















 


EXHIBIT B


 


COMPLIANCE CERTIFICATE


 


	
  To:

  	
   

  	
  The Lenders parties to the

  
	
   

  	
   

  	
  Credit Agreement
  Described Below

  



 


This Compliance
Certificate is furnished pursuant to that certain Senior Term Credit Agreement
dated as of May 21, 2004 (as amended, modified, renewed or extended from time
to time, the “Agreement”) among Clayton Williams Energy, Inc., a Delaware
corporation, and CWEI-SWR, Inc., a Delaware corporation (collectively, the
“Borrowers”, and each a “Borrower”), Warrior Gas Co., a Texas corporation, CWEI
Acquisitions, Inc., a Delaware corporation, Romere Pass Acquisitions L.L.C., a
Delaware limited liability company, and CWEI Romere Pass Acquisition Corp., a
Delaware corporation (“Guarantors” and each a Guarantor”), the lenders party
thereto and Bank One, NA, as the Administrative Agent for the Lenders, Union
Bank of California, N.A., as Syndication Agent, and Bank of Scotland, as the
Co-Agent.  Unless otherwise defined
herein, capitalized terms used in this Compliance Certificate have the meanings
ascribed thereto in the Agreement.


 


THE UNDERSIGNED HEREBY
CERTIFIES THAT:


 


1.             I
am the duly elected
                            
of CWEI;


 


2.             I
have reviewed the terms of the Agreement and I have made, or have caused to be
made under my supervision, a detailed review of the transactions and conditions
of CWEI and its Subsidiaries during the accounting period covered by the
attached financial statements;


 


3.             The
examinations described in paragraph 2 did not disclose, and I have no knowledge
of, the existence of any condition or event which constitutes a Default or
Unmatured Default during or at the end of the accounting period covered by the
attached financial statements or as of the date of this Certificate, except as
set forth below; and


 


4.             Schedule
I attached hereto sets forth financial data and computations evidencing the
Borrower’s compliance with certain covenants of the Agreement, all of which
data and computations are true, complete and correct.


 


5.             Schedule
II attached hereto sets forth the various reports and deliveries which are
required at this time under the Agreement and the other Loan Documents and the
status of compliance.


 


Described below are the
exceptions, if any, to paragraph 3 by listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
CWEI and its Subsidiaries have taken, is taking, or proposes to take with
respect to each such condition or event:


 


 

















 


 


The foregoing
certifications, together with the computations set forth in Schedule I hereto
and the financial statements delivered with this Certificate in support hereof,
are made and delivered this         day of
                 ,
       .


 

















 


SCHEDULE I TO COMPLIANCE
CERTIFICATE


 


Compliance as of
             ,
         with

Provisions of 7.22.1 and 7.22.2 of

the Agreement


 

















 


SCHEDULE II TO COMPLIANCE
CERTIFICATE


 


Reports and Deliveries
Currently Due


 

















 


EXHIBIT C


 


ASSIGNMENT AND ASSUMPTION
AGREEMENT


 


This Assignment and
Assumption (the “Assignment and Assumption”) is dated as of the
Effective Date set forth below and is entered into by and between [Insert name
of Assignor] (the “Assignor”) and [Insert name of Assignee]
(the “Assignee”).  Capitalized
terms used but not defined herein shall have the meanings given to them in the
Senior Term Credit Agreement identified below (as amended, the “Credit
Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee.  The Terms and Conditions set
forth in Annex 1 attached hereto are hereby agreed to and incorporated herein
by reference and made a part of this Assignment and Assumption as if set forth
herein in full.


 


For an agreed consideration,
the Assignor hereby irrevocably sells and assigns to the Assignee, and the
Assignee hereby irrevocably purchases and assumes from the Assignor, subject to
and in accordance with the Terms and Conditions and the Credit Agreement, as of
the Effective Date inserted by the Administrative Agent as contemplated below,
the interest in and to all of the Assignor’s rights and obligations in its
capacity as a Lender under the Credit Agreement and any other documents or
instruments delivered pursuant thereto that represents the amount and
percentage interest identified below of all of the Assignor’s outstanding
rights and obligations under the respective facilities identified below
(including, without limitation and to the extent permitted to be assigned under
applicable law, all claims (including without limitation contract claims, tort
claims, malpractice claims, statutory claims and all other claims at law or in
equity), suits, causes of action and any other right of the Assignor against
any Person whether known or unknown arising under or in connection with the
Credit Agreement, any other documents or instruments delivered pursuant thereto
or the loan transactions governed thereby) (the “Assigned Interest”).  Such sale and assignment is without recourse
to the Assignor and, except as expressly provided in this Assignment and
Assumption, without representation or warranty by the Assignor.


 


	
  1.

  	
   

  	
  Assignor:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Assignee:

  	
   

  	
                                                                     [and
  is an Affiliate/Approved Fund of [identify Lender]](1)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Borrower(s):

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Administrative

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Agent:

  	
   

  	
                                                                     ,
  as the agent under the Credit Agreement.

  



 


	
   

  
	
  5.

  	
   

  	
  Credit Agreement:

  	
   

  	
  The $75,000,000  Senior Term Credit Agreement dated as of
  May 21, 2004 among Clayton Williams Energy, Inc. and CWEI-SWR, Inc.
  (“Borrowers”), Warrior Gas Co., CWEI Acquisition Corp., Romere Pass
  Acquisition L.L.C. and CWEI Romere Pass Acquisition Corp. (“Guarantors”), the
  Lenders party thereto, Bank One, NA, , as the Administrative Agent, and the
  other agents party thereto.

  



 












(1) 
Select as applicable.


 

















 


6.             Assigned Interest:


 


	
  Aggregate Amount of

  Loans for all Lenders*

  	
   

  	
  Amount of
  Loans

  Assigned*

  	
   

  	
  Percentage
  Assigned of

  Loans(2)

  	
   

  
	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  
	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  
	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  



 


7.             Trade
Date:                                                     (4)


 


Effective Date:
                                        ,
20      [TO BE INSERTED BY THE ADMINISTRATIVE AGENT
AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER BY THE
ADMINISTRATIVE AGENT.]


 


The terms set forth in
this Assignment and Assumption are hereby agreed to:


 


 


	
   

  	
  ASSIGNOR

  
	
   

  	
  [NAME OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ASSIGNEE

  
	
   

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  
				



 

















 


	
  [Consented
  to and](5)  Accepted:

  	
   

  
	
   

  	
   

  
	
  BANK ONE, NA,

  	
   

  
	
  as the Administrative
  Agent

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  CLAYTON WILLIAMS
  ENERGY, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Mel G. Riggs, Senior
  Vice President-Finance

  
	
   

  
	
  CWEI-SWR, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
							



 












*Amount to be adjusted by the counterparties to take
into account any payments or prepayments made between the Trade Date and the
Effective Date.


(2)  Set forth, to at least 9 decimals, as a
percentage of the Commitment/Loans of all Lenders thereunder.


(3) Fill in the appropriate terminology for the types
of facilities under the Credit Agreement that are being assigned under this
Assignment (e.g. “Term Loan Commitment,”, etc.)


(4)  Insert if satisfaction of minimum
amounts is to be determined as of the Trade Date.


(5)  To be added only if the consent of the
Administrative Agent is required by the terms of the Credit Agreement.


 

















 


ANNEX I

TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION


 


1.             Representations
and Warranties.


 


1.1           Assignor.  The Assignor represents and warrants that
(i) it is the legal and beneficial owner of the Assigned Interest,
(ii) the Assigned Interest is free and clear of any lien, encumbrance or
other adverse claim and (iii) it has full power and authority, and has
taken all action necessary, to execute and deliver this Assignment and
Assumption and to consummate the transactions contemplated hereby.  Neither the Assignor nor any of its
officers, directors, employees, agents or attorneys shall be responsible for
(i) any statements, warranties or representations made in or in connection
with the Credit Agreement or any other Loan Document, (ii) the execution,
legality, validity, enforceability, genuineness, sufficiency, perfection,
priority, collectibility, or value of the Loan Documents or any collateral
thereunder, (iii) the financial condition of the Guarantors, the
Borrowers, any of their Subsidiaries or Affiliates or any other Person
obligated in respect of any Loan Document, (iv) the performance or observance
by the Guarantors, the Borrowers, any of their Subsidiaries or Affiliates or
any other Person of any of their respective obligations under any Loan
Documents, (v) inspecting any of the property, books or records of any
Borrower, or any Guarantor, or (vi) any mistake, error of judgment, or
action taken or omitted to be taken in connection with the Loans or the Loan
Documents.


 


1.2           Assignee.  The Assignee (a) represents and warrants
that (i) it has full power and authority, and has taken all action necessary,
to execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby and to become a Lender under the Credit
Agreement, (ii) from and after the Effective Date, it shall be bound by
the provisions of the Credit Agreement as a Lender thereunder and, to the
extent of the Assigned Interest, shall have the obligations of a Lender
thereunder, (iii) agrees that its payment instructions and notice
instructions are as set forth in Schedule 1 to this Assignment and Assumption,
(iv) confirms that none of the funds, monies, assets or other
consideration being used to make the purchase and assumption hereunder are
“plan assets” as defined under ERISA and that its rights, benefits and
interests in and under the Loan Documents will not be “plan assets” under
ERISA, (v) agrees to indemnify and hold the Assignor harmless against all
losses, costs and expenses (including, without limitation, reasonable
attorneys’ fees) and liabilities incurred by the Assignor in connection with or
arising in any manner from the Assignee’s non-performance of the obligations
assumed under this Assignment and Assumption, (vi) it has received a copy
of the Credit Agreement, together with copies of financial statements and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Assumption and
to purchase the Assigned Interest on the basis of which it has made such
analysis and decision independently and without reliance on the Administrative
Agent or any other Lender, and (vii) attached as Schedule 1 to this
Assignment and Assumption is any documentation required to be delivered by the
Assignee with respect to its tax status pursuant to the terms of the Credit
Agreement, duly completed and executed by the Assignee and (b) agrees that
(i) it will, independently and without reliance on the Administrative
Agent, the Assignor or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Loan Documents, and
(ii) it will perform in accordance with their terms all of the obligations
which by the terms of the Loan Documents are required to be performed by it as
a Lender.


 


2.             Payments.  The Assignee shall pay the Assignor, on the
Effective Date, the amount agreed to by the Assignor and the Assignee.  From and after the Effective Date, the
Administrative Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees


 

















 


and other amounts) to the Assignor for amounts which
have accrued to but excluding the Effective Date and to the Assignee for
amounts which have accrued from and after the Effective Date.


 


3.             General
Provisions.  This Assignment and
Assumption shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors and assigns.  This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument.  Delivery of an executed counterpart of a
signature page of this Assignment and Assumption by telecopy shall be effective
as delivery of a manually executed counterpart of this Assignment and
Assumption.  This Assignment and
Assumption shall be governed by, and construed in accordance with, the law of
the State of Texas.


 

















 


ADMINISTRATIVE
QUESTIONNAIRE


 


(Schedule to be supplied by Closing Unit or Trading
Documentation Unit)


 


(For Forms for Primary Syndication call Peterine
Svoboda at 312-732-8844)

(For Forms after Primary Syndication call Jim Bartz at 312-732-1242)


 

















 


US AND NON-US TAX
INFORMATION REPORTING REQUIREMENTS


 


(Schedule to be supplied by Closing Unit or Trading
Documentation Unit)


 


(For Forms for Primary Syndication call Peterine
Svoboda at 312-732-8844)

(For Forms after Primary Syndication call Jim Bartz at 312-732-1242)


 

















 


EXHIBIT D


 


LOAN/CREDIT RELATED MONEY
TRANSFER INSTRUCTION


 


To Bank One, NA,


as the Administrative Agent (the “Administrative
Agent”) under the Credit Agreement


Described
Below.


 


Re:                               Senior
Term Credit Agreement, dated May 21, 2004 (as the same may be amended or
modified, the “Credit Agreement”), among Clayton Williams Energy, Inc. and
CWEI-SWR, Inc. (the “Borrowers”), Warrior Gas Co., CWEI Acquisitions, Inc.,
Romere Pass Acquisition L.L.C. and CWEI Romere Pass Acquisition Corp.
(“Guarantors”), the Lenders named therein, Bank One, NA, as the Administrative
Agent, Union Bank of California, N.A., as the Syndication Agent, and Bank of
Scotland, as the Co-Agent.  Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned thereto in the Credit Agreement.


 


Administrative Agent is
specifically authorized and directed to act upon the following money transfer
instructions with respect to the proceeds of the initial Advance.


 


Facility Identification
Number(s)


 


Customer/Account Name


 


Transfer Funds To


 


 


For Account No.


 


Reference/Attention To


 


	
  Authorized Officer
  (Customer Representative)

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Please Print)

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Bank Officer Name

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Please Print)

  	
   

  	
  Signature

  
					



 


(Deliver Completed Form to Credit Support Staff For
Immediate Processing)


 

















 


EXHIBIT E


 


NOTE


 


[Date]


 


Each of Clayton Williams
Energy, Inc., a Delaware corporation, and CWEI-SWR, Inc., a Delaware
corporation (collectively, the “Borrowers”), jointly and severally, promise to
pay to the order of
                                                                             
(the “Lender”) the aggregate unpaid principal amount of all Loans made by the
Lender to the Borrowers pursuant to Article II of the Agreement (as hereinafter
defined), in immediately available U.S. Dollars at the main office of Bank One,
NA, in Chicago, Illinois, as the Administrative Agent, together with interest
on the unpaid principal amount hereof at the rates and on the dates set forth
in the Agreement.  The Borrowers shall
pay the principal of and accrued and unpaid interest on the Loans in full on
the Facility Termination Date and shall make such mandatory payments as are
required to be made under the terms of Article II of the Agreement.


 


The Lender shall, and is
hereby authorized to, record on the schedule attached hereto, or to otherwise
record in accordance with its usual practice, the date and amount of each Loan
and the date and amount of each principal payment hereunder.


 


This Note is one of the
Notes issued pursuant to, and is entitled to the benefits of, the Senior Term
Credit Agreement dated as of May 21, 2004 (which, as it may be amended or
modified and in effect from time to time, is herein called the “Agreement”),
among the Borrowers, certain guarantors a party thereto, the lenders party
thereto, including the Lender, and Bank One, NA, as the Administrative Agent,
Union Bank of California, N.A., as the Syndication Agent, and Bank of Scotland,
as the Co-Agent, to which Agreement reference is hereby made for a statement of
the terms and conditions governing this Note, including the terms and
conditions under which this Note may be prepaid or its maturity date
accelerated.  This Note is secured
pursuant to the Collateral Documents and is guaranteed pursuant to the Guaranty
as more specifically described in the Agreement, and reference is made thereto
for a statement of the terms and provisions thereof.  Capitalized terms used herein and not otherwise defined herein
are used with the meanings attributed to them in the Agreement.


 


	
   

  	
  CLAYTON WILLIAMS ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CWEI-SWR, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 

















 


SCHEDULE OF LOANS AND
PAYMENTS OF PRINCIPAL

TO

NOTE OF
                  ,

DATED
             ,




	
  Date

  	
   

  	
  Principal

  Amount of

  Loan

  	
   

  	
  Maturity

  of Interest

  Period

  	
   

  	
  Principal

  Amount

  Paid

  	
   

  	
  Unpaid

  Balance

  	
   

  



 

















 


EXHIBIT F


 


CERTIFICATE OF
EFFECTIVENESS


 


This Certificate of
Effectiveness (this “Certificate”) is executed as of May
[    ], 2004, by and between Clayton Williams Energy, Inc.,
a Delaware corporation, and CWEI-SWR, Inc., a Delaware corporation
(collectively, the “Borrowers”), Warrior Gas Co., a Texas corporation, CWEI
Acquisitions, Inc., a Delaware corporation, Romere Pass Acquisition L.L.C., a
Delaware limited liability company, and CWEI Romere Pass Acquisition Corp., a
Delaware corporation (collectively, the “Guarantors”), Union Bank of
California, N.A., as the Syndication Agent, and Bank of Scotland, as the
Co-Agent, and Bank One, NA, with its main office in Chicago, Illinois, as the
Administrative Agent (“Administrative Agent”) for the Lenders under and
as defined in that certain Senior Term Credit Agreement (the “Agreement”)
dated as of May 21, 2004 by and among the Borrowers, Guarantors, the
Administrative Agent and the Lenders named therein.  This Certificate is executed pursuant to Section 0 of the
Agreement and is the “Certificate of Effectiveness” therein referenced.  Unless otherwise defined herein, all terms
used herein with their initial letter capitalized shall have the meaning given
such terms in the Agreement.  The
Borrowers and the Administrative Agent on behalf of itself and the Lenders
hereby acknowledge and agree as follows:


 


4.             The
Borrowers have satisfied each condition precedent to the effectiveness of the
Agreement contained in Section 0 of the Agreement.


 


5.             This
Agreement is effective as of the date hereof.


 


 


	
   

  	
  BANK ONE, NA, as the
  Administrative Agent for the Lenders

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Wm. Mark Cranmer

  
	
   

  	
  Title:

  	
  Director, Capital
  Markets

  
				



 

















 


	
   

  	
  CLAYTON WILLIAMS
  ENERGY, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


 


	
   

  	
  WARRIOR GAS CO.,

  
	
   

  	
  a Texas corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


 


	
   

  	
  CWEI-SWR, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 

















 


EXHIBIT G


 


FORM OF PLEDGE AGREEMENT


 

















 


EXHIBIT H


 


FORM OF SWR HEDGE
ASSUMPTION AGREEMENT


 


ASSIGNMENT AGREEMENT


 


This Assignment Agreement
(“Assignment Agreement”) is made as of the 16th day of May, 2004
between:


 


(1)           SOUTHWEST ROYALTIES, INC. (the
“Retiring Company”);


 


(2)           BANK ONE, NA (CHICAGO, ILLINOIS) (the
“New Counterparty”) and


 


(3)           MACQUARIE BANK LIMITED (“MACQUARIE”)


 


BACKGROUND:


 


(A)          MACQUARIE and the Retiring
Counterparty entered into certain commodity swap transactions the confirmations
for which are included in Schedule 1 hereto (the “Transferred Swaps) pursuant
to an ISDA Master Agreement dated as of September 15, 2003 (as amended,
supplemented and otherwise modified and in effect from time to time, the
“Existing Master Agreement”).


 


(B)           MACQUARIE and the New Counterparty
entered into an ISDA Master Agreement dated as of August 26, 1992 (as amended,
supplemented and otherwise modified and in effect from time to time, the “New
Master Agreement”).


 


(C)           The parties hereto have agreed that
with effect from and including the effective date detailed in Schedule 1 hereto
(the “Effective Date”) all the rights and obligations of the Retiring
Counterparty in respect of the Transferred Swaps should be transferred to the
New Counterparty on the basis hereinafter described and shall be deemed to be
subject to the New Master Agreement.


 


NOW IT IS HEREBY AGREED
AS FOLLOWS:


 


Assignment
and Assumption


 


Effective as of the
Effective Date, the Retiring Counterparty hereby assigns, transfers and sets
over to the New Counterparty all the right, title and interest, powers,
privileges and remedies of the Retiring Counterparty under the Transferred
Swaps, and the Retiring Counterparty hereby delegates and the New Counterparty
hereby assumes all duties, liabilities and obligations of the Retiring
Counterparty under the Transferred Swaps. 
MACQUARIE and the New Counterparty shall execute confirmations in the
form attached as Schedule I hereto setting forth the terms of the assigned
transactions between them, subject to the New Master Agreement.


 


Consent
and Release


 


MACQUARIE hereby consents
to the foregoing assignment and delegation. 
As of the Effective Date, Retiring Counterparty and MACQUARIE release
one another from all obligations with respect to the Transferred Swaps,
provided that such release shall not affect any rights or obligations arising
before such Effective Date.  Other than
obligations arising under the Transferred Swaps prior to the Effective Date,
the Retiring Counterparty shall not be required to make any payments to
MACQUARIE or the New


 

















 


Counterparty in respect of the Transferred Swaps or
the assignment contemplated by this Assignment Agreement.


 


Representations


 


Each party hereby
represents that (i) it is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization or incorporation, (ii)
it has the power to execute and deliver this Assignment Agreement and to
perform its obligations under this Assignment Agreement and has taken all
necessary action to authorize such execution and delivery and performance of
such obligations, (iii) its execution and delivery of this Assignment Agreement
does not violate or conflict with any law, rule or regulation applicable to it,
any provision of its charter or by-laws (or comparable constituent documents),
any order or judgment of any court or other agency of government applicable to
it or any of its assets, (iv) all authorizations of and exemptions, actions or
approvals by, and all notices to or filings with any governmental or other
authority that are required to have been obtained or made by the party at any
time this representation is made with respect to this Assignment Agreement have
been obtained or made and are in full force and effect and all conditions of
any such authorizations, exemptions, actions or approvals have been complied
with, and (v) this Assignment Agreement constitutes the party’s legal, valid
and binding obligation, enforceable against the party in accordance with its
terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium
or similar laws affecting creditors’ rights generally and subject, as to enforceability,
to equitable principles of general application (regardless of whether
enforcement is sought in a proceeding in equity or at law).  The Retiring Counterparty and MACQUARIE each
represent that no event or condition has occurred that constitutes (or would
with the giving of notice or the passage of time or both constitute) an Event
of Default (as such term is defined in the 1992 ISDA Master Agreement
(Multicurrency Cross Border) (the “ISDA Master Agreement”)) or, to the party’s
knowledge, a Termination Event (as such term is defined in the ISDA Master
Agreement), with respect to the party, and no such event would occur as a
result of the party’s entering into or performing its obligations under this
Assignment Agreement.


 


Governing
Law


 


This Assignment Agreement
shall be governed by and construed in accordance, with the laws of the State of
New York without reference to choice of law doctrine.


 


Counterparts


 


This Assignment Agreement
may be executed in any number of counterparts, each of which will be deemed an
original.


 


IN WITNESS WHEREOF the
parties have executed this Assignment Agreement with effect from the Effective
Date.


 








 


	
  SOUTHWEST ROYALTIES,
  INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
					



 


 


	
  BANK ONE, NA (CHICAGO,
  ILLINOIS)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
					



 


 


	
  MACQUARIE BANK LIMITED

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
					



 

















 


SCHEDULE I


 


EFFECTIVE DATE
– MAY 21, 2004


 


TRANSFERRED
COMMODITY SWAPS – SEE ATTACHED CONFIRMATIONS


REFS# - HH
0501701/2 AND HH 0501703/4


 

















 


EXHIBIT I


 


FORM OF GUARANTY


 

















 


GUARANTY


 


This GUARANTY (this “Guaranty”) is
made as [      ]
day of [                           ],
[          ]
by [                                  ],
a [                                  ]
and [                                  ],
a [                                  ]
(collectively, the “Guarantors”) in favor of the Administrative Agent, for the
benefit of the Lenders, under the Credit Agreement referred to below;


 


WHEREAS CLAYTON WILLIAMS ENERGY, INC., a
Delaware corporation (“CWEI”), CWEI-SWR, INC., a Delaware corporation (“Merger
Sub” and together with CWEI, each a “Borrower” and, collectively, the
“Borrowers”), CWEI ACQUISITIONS, INC., a Delaware corporation (“CWEI
Acquisitions”), WARRIOR GAS CO., a Texas corporation (“Warrior”), ROMERE PASS
ACQUISITION L.L.C., A Delaware limited liability company (“Romere”), CWEI
ROMERE PASS ACQUISITION CORP., a Delaware corporation, and BANK ONE, NA, a
national banking association having its main office in Chicago, Illinois, as
Administrative Agent (the “Administrative Agent”), UNION BANK OF CALIFORNIA,
N.A., as Syndication Agent, BANK OF SCOTLAND, as Co-Agent, and certain other
Lenders from time to time party thereto have entered into that certain Senior
Term Credit Agreement dated as of May 21, 2004 (as same may be amended or
modified from time to time, the “Credit Agreement”), providing, subject to the
terms and conditions thereof, for extensions of credit to be made by the
Lenders to the Borrowers;


 


WHEREAS, it is a condition precedent to the
Administrative Agent and the Lenders amending the Credit Agreement that each of
the Guarantors execute and deliver this Guaranty whereby each of the Guarantors
shall guarantee the payment when due, subject to Section 9 hereof, of all
Guaranteed Obligations, as defined below; and


 


WHEREAS, in consideration of the financial
and other support that the Borrowers have provided, and such financial and
other support as the Borrowers may in the future provide, to the Guarantors,
and in order to induce the Lenders and the Administrative Agent to enter into
the Credit Agreement, and because each Guarantor has determined that executing
this Guaranty is in its interest and to its financial benefit, each of the
Guarantors is willing to guarantee the obligations of the Borrowers under the
Credit Agreement, any Note, and the other Loan Documents;


 


NOW, THEREFORE, in consideration of the
premises and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:


 


SECTION 1.1.  Selected Terms Used Herein.


 


“Guaranteed Obligations”
is defined in Section 3 below.


 


SECTION 1.2.        Terms in Credit Agreement.  Other capitalized terms used herein but not
defined herein shall have the meaning set forth in the Credit Agreement.


 


SECTION 2.1.  Representations and Warranties.  Each of the Guarantors represents and
warrants that:


 


(a)           It is a corporation, partnership or
limited liability company duly and properly incorporated or organized, as the
case may be, validly existing and (to the extent such concept applies to such
entity) in good standing under the laws of its jurisdiction of incorporation or
organization and has all requisite authority to conduct its business in each
jurisdiction in which its business is conducted.


 

















 


(b)           It has the power and authority and
legal right to execute and deliver this Guaranty and to perform its obligations
hereunder.  The execution and delivery
by it of this Guaranty and the performance of its obligations hereunder have
been duly authorized by proper corporate, partnership or limited liability
company proceedings, and this Guaranty constitutes a legal, valid and binding
obligation of such Guarantor enforceable against it in accordance with its
terms, except as enforceability may be limited by general principles of equity
and bankruptcy, insolvency or similar laws affecting the enforcement of
creditors’ rights generally.


 


(c)           Neither the execution and delivery by
it of this Guaranty, nor the consummation of the transactions herein
contemplated, nor compliance with the provisions hereof will violate (i) any
law, rule, regulation, order, writ, judgment, injunction, decree or award
binding on it or any of its subsidiaries or (ii) its articles or certificate of
incorporation, partnership agreement, certificate of partnership, articles or
certificate of organization, by-laws, or operating or other management
agreement, as the case may be, or (iii) the provisions of any indenture,
instrument or agreement to which it or any of its subsidiaries is a party or is
subject, or by which it, or its Property, is bound, or conflict with or
constitute a default thereunder, or result in, or require, the creation or
imposition of any Lien in, of or on the Property of such Guarantor or a
subsidiary thereof pursuant to the terms of any such indenture, instrument or
agreement.  No order, consent,
adjudication, approval, license, authorization, or validation of, or filing,
recording or registration with, or exemption by, or other action in respect of
any governmental or public body or authority, or any subdivision thereof, which
has not been obtained by it or any of its subsidiaries, is required to be
obtained by it or any of its subsidiaries in connection with the execution and
delivery of this Guaranty or the performance by it of its obligations hereunder
or the legality, validity, binding effect or enforceability of this Guaranty.


 


SECTION 2.2.  Covenants.  Each of the Guarantors covenants that, so long as any Lender has
any Commitment outstanding under the Credit Agreement, or any of the Guaranteed
Obligations shall remain unpaid, that it will, and, if necessary, will enable
the Borrowers to, fully comply with those covenants and agreements set forth in
the Credit Agreement.


 


SECTION 3.  The Guaranty.  Subject to Section 9 hereof, each of the
Guarantors hereby absolutely and unconditionally guarantees, as primary obligor
and not as surety, the full and punctual payment (whether at stated maturity,
upon acceleration or early termination or otherwise, and at all times
thereafter) and performance of the Obligations, including without limitation
any such Obligations incurred or accrued during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, whether or not allowed or
allowable in such proceeding (collectively, subject to the provisions of
Section 9 hereof, being referred to collectively as the “Guaranteed
Obligations”).  Upon failure by any
Borrower to pay punctually any such amount, each of the Guarantors agrees that
it shall forthwith on demand pay to the Administrative Agent for the benefit of
the Lenders and, if applicable, their Affiliates, the amount not so paid at the
place and in the manner specified in the Credit Agreement, any Note, or the
relevant Loan Document, as the case may be. This Guaranty is a guaranty of
payment and not of collection.  Each of
the Guarantors waives any right to require the Lender to sue any Borrower, any
other guarantor, or any other person obligated for all or any part of the
Guaranteed Obligations, or otherwise to enforce its payment against any
collateral securing all or any part of the Guaranteed Obligations.


 

















 


SECTION 4.  Guaranty Unconditional.  Subject to Section 9 hereof, the obligations
of each of the Guarantors hereunder shall be unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by:


 


(i)            any extension, renewal, settlement,
compromise, waiver or release in respect of any of the Guaranteed Obligations,
by operation of law or otherwise, or any obligation of any other guarantor of
any of the Guaranteed Obligations, or any default, failure or delay, willful or
otherwise, in the payment or performance of the Guaranteed Obligations;


 


(ii)           any modification or amendment of or
supplement to the Credit Agreement, any Note, or any other Loan Document;


 


(iii)          any release, nonperfection or
invalidity of any direct or indirect security for any obligation of the
Borrowers under the Credit Agreement, any Note, any Collateral Document, any
other Loan Document, or any obligations of any other guarantor of any of the
Guaranteed Obligations, or any action or failure to act by the Administrative
Agent, any Lender or any Affiliate of any Lender with respect to any collateral
securing all or any part of the Guaranteed Obligations;


 


(iv)          any change in the corporate,
partnership or limited liability company existence, structure or ownership of
any Borrower or any other guarantor of any of the Guaranteed Obligations, or
any insolvency, bankruptcy, reorganization or other similar proceeding
affecting any Borrower, or any other guarantor of the Guaranteed Obligations,
or its assets or any resulting release or discharge of any obligation of any
Borrower, or any other guarantor of any of the Guaranteed Obligations;


 


(v)           the existence of any claim, setoff or
other rights which the Guarantors may have at any time against any Borrower,
any other guarantor of any of the Guaranteed Obligations, the Administrative
Agent, any Lender or any other Person, whether in connection herewith or any
unrelated transactions;


 


(vi)          any invalidity or unenforceability
relating to or against any Borrower, or any other guarantor of any of the
Guaranteed Obligations, for any reason related to the Credit Agreement, any
other Loan Document, or any provision of applicable law or regulation
purporting to prohibit the payment by any Borrower, or any other guarantor of
the Guaranteed Obligations, of the principal of or interest on any Note or any
other amount payable by the Borrowers under the Credit Agreement, any Note or
any other Loan Document; or


 


(vii)         any other act or omission to act or
delay of any kind by any Borrower, any other guarantor of the Guaranteed
Obligations, the Administrative Agent, any Lender or any other Person or any
other circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of any Guarantor’s
obligations hereunder.


 


SECTION 5.  Discharge Only Upon Payment In Full:
Reinstatement In Certain Circumstances. 
Each of the Guarantor’s obligations hereunder shall remain in full force
and effect until all Guaranteed Obligations shall have been indefeasibly paid
in full, the Commitments under the Credit Agreement shall have terminated or
expired.  If at any time any payment of
the principal of or interest on any Note or any other amount payable by the
Borrowers or any other party under the Credit Agreement or any other Loan
Document is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy or


 

















 


reorganization of any Borrower or otherwise, each of
the Guarantor’s obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.


 


SECTION 6.  Waivers.  Each of the Guarantors irrevocably waives acceptance hereof,
presentment, demand, protest and, to the fullest extent permitted by law, any
notice not provided for herein, as well as any requirement that at any time any
action be taken by any Person against any Borrower, any other guarantor of any
of the Guaranteed Obligations, or any other Person.


 


SECTION 7.  Subrogation.  Each of the Guarantors hereby agrees not to
assert any right, claim or cause of action, including, without limitation, a
claim for subrogation, reimbursement, indemnification or otherwise, against any
Borrower arising out of or by reason of this Guaranty or the obligations
hereunder, including, without limitation, the payment or securing or purchasing
of any of the Guaranteed Obligations by any of the Guarantors unless and until
the Guaranteed Obligations are indefeasibly paid in full, any commitment to
lend under the Credit Agreement and any other Loan Documents is terminated.


 


SECTION 8.  Stay of Acceleration.  If acceleration of the time for payment of
any of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy or
reorganization of any Borrower, all such amounts otherwise subject to
acceleration under the terms of the Credit Agreement, any Note, or any other
Loan Document shall nonetheless be payable by each of the Guarantors hereunder
forthwith on demand by the Administrative Agent made at the request of the
Required Lenders.


 


SECTION 9.  Limitation on Obligations.


 


(a)           The provisions of this Guaranty are
severable, and in any action or proceeding involving any state corporate,
partnership or limited liability company law, or any state, federal or foreign
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Guarantor under this Guaranty
would otherwise be held or determined to be avoidable, invalid or unenforceable
on account of the amount of such Guarantor’s liability under this Guaranty,
then, notwithstanding any other provision of this Guaranty to the contrary, the
amount of such liability shall, without any further action by the Guarantors,
the Administrative Agent or any Lender, be automatically limited and reduced to
the highest amount that is valid and enforceable as determined in such action
or proceeding (such highest amount determined hereunder being the relevant
Guarantor’s “Maximum Liability”). This Section 9(a) with respect to the Maximum
Liability of the Guarantors is intended solely to preserve the rights of the
Administrative Agent hereunder to the maximum extent not subject to avoidance
under applicable law, and neither the Guarantor nor any other person or entity
shall have any right or claim under this Section 9(a) with respect to the
Maximum Liability, except to the extent necessary so that the obligations of
the Guarantor hereunder shall not be rendered voidable under applicable law.


 


(b)           Each of the Guarantors agrees that
the Guaranteed Obligations may at any time and from time to time exceed the
Maximum Liability of each Guarantor, and may exceed the aggregate Maximum
Liability of all other Guarantors, without impairing this Guaranty or affecting
the rights and remedies of the Administrative Agent hereunder. Nothing in this
Section 9(b) shall be construed to increase any Guarantor’s obligations
hereunder beyond its Maximum Liability.


 

















 


(c)           In the event any Guarantor (a “Paying
Guarantor”) shall make any payment or payments under this Guaranty or shall
suffer any loss as a result of any realization upon any collateral granted by
it to secure its obligations under this Guaranty, each other Guarantor (each a
“Non-Paying Guarantor”) shall contribute to such Paying Guarantor an amount
equal to such Non-Paying Guarantor’s “Pro Rata Share” of such payment or
payments made, or losses suffered, by such Paying Guarantor.  For the purposes hereof, each Non-Paying
Guarantor’s “Pro Rata Share” with respect to any such payment or loss by a
Paying Guarantor shall be determined as of the date on which such payment or
loss was made by reference to the ratio of (i) such Non-Paying Guarantor’s
Maximum Liability as of such date (without giving effect to any right to
receive, or obligation to make, any contribution hereunder) or, if such
Non-Paying Guarantor’s Maximum Liability has not been determined, the aggregate
amount of all monies received by such Non-Paying Guarantor from the Borrowers
after the date hereof (whether by loan, capital infusion or by other means) to
(ii) the aggregate Maximum Liability of all Guarantors hereunder (including
such Paying Guarantor) as of such date (without giving effect to any right to
receive, or obligation to make, any contribution hereunder), or to the extent
that a Maximum Liability has not been determined for any Guarantors, the
aggregate amount of all monies received by such Guarantors from the Borrowers
after the date hereof (whether by loan, capital infusion or by other
means).  Nothing in this Section 9 (c)
shall affect any Guarantor’s several liability for the entire amount of the
Guaranteed Obligations (up to such Guarantor’s Maximum Liability).  Each of the Guarantors covenants and agrees
that its right to receive any contribution under this Guaranty from a
Non-Paying Guarantor shall be subordinate and junior in right of payment to all
the Guaranteed Obligations.  The
provisions of this Section 9(c) are for the benefit of both the Administrative
Agent and the Guarantors and may be enforced by any one, or more, or all of
them in accordance with the terms hereof.


 


SECTION 10.  Subordination of Other Obligations of the
Borrowers.  Any indebtedness of the
Borrowers now or hereafter held by any Guarantor is hereby subordinated in
right of payment to the Guaranteed Obligations, provided prior to a Default,
such Guarantor may receive ordinary course or regularly scheduled payments of
such indebtedness.  Any such
indebtedness of the Borrowers to any Guarantor collected or received by such
Guarantor after a Default has occurred and is continuing shall be held in trust
for the Lenders and shall forthwith be paid over to the Lenders to be credited
and applied against the Guaranteed Obligations but without affecting, impairing
or limiting in any manner the liability of any Guarantor under any other
provision of this Guaranty.


 


SECTION 11.  Application of Payments.  All payments received by the Administrative
Agent hereunder shall be applied by the Administrative Agent to payment of the
Guaranteed Obligations in the following order unless a court of competent
jurisdiction shall otherwise direct:


 


(a)           FIRST, to payment of all costs and
expenses of the Administrative Agent incurred in connection with the collection
and enforcement of the Guaranteed Obligations or of any security interest
granted to the Administrative Agent in connection with any collateral securing
the Guaranteed Obligations;


 


(b)           SECOND, to payment of that portion of
the Guaranteed Obligations constituting accrued and unpaid interest and fees,
pro rata among the Lenders and their Affiliates in accordance with the amount
of such accrued and unpaid interest and fees owing to each of them;


 


(c)           THIRD, to payment of the principal of
the Guaranteed Obligations, pro rata among the Lenders and their Affiliates in
accordance with the amount of such principal; and


 

















 


(d)           FOURTH, to payment of any Guaranteed
Obligations (other than those listed above) pro rata among those parties to
whom such Guaranteed Obligations are due in accordance with the amounts owing
to each of them.


 


SECTION 12.  Notices.  All notices, requests and other communications to any party
hereunder shall be given or made by telecopier or other writing and telecopied,
or mailed or delivered to the intended recipient at its address or telecopier
number set forth on the signature pages hereof or such other address or
telecopy number as such party may hereafter specify for such purpose by notice
to the Administrative Agent in accordance with the provisions of
Article XIV of the Credit Agreement. 
Except as otherwise provided in this Guaranty, all such communications
shall be deemed to have been duly given when transmitted by telecopier, or
personally delivered or, in the case of a mailed notice sent by certified mail
return-receipt requested, on the date set forth on the receipt (provided, that
any refusal to accept any such notice shall be deemed to be notice thereof as
of the time of any such refusal), in each case given or addressed as aforesaid.


 


SECTION 13.  No Waivers.  No failure or delay by the Administrative Agent or any Lenders in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.  The rights and remedies
provided in this Guaranty, the Credit Agreement, any Note, and the other Loan
Documents shall be cumulative and not exclusive of any rights or remedies
provided by law.


 


SECTION 14.  No Duty to Advise.  Each of the Guarantors assumes all
responsibility for being and keeping itself informed of each Borrower’s
financial condition and assets, and of all other circumstances bearing upon the
risk of nonpayment of the Guaranteed Obligations and the nature, scope and
extent of the risks that each of the Guarantors assumes and incurs under this
Guaranty, and agrees that neither the Administrative Agent nor any Lender has
any duty to advise any of the Guarantors of information known to it regarding
those circumstances or risks.


 


SECTION 15.  Successors and Assigns.  This Guaranty is for the benefit of the
Administrative Agent and the Lenders and their respective successors and
permitted assigns and in the event of an assignment of any amounts payable
under the Credit Agreement, any Note, or the other Loan Documents, the rights
hereunder, to the extent applicable to the indebtedness so assigned, shall be
transferred with such indebtedness. This Guaranty shall be binding upon each of
the Guarantors and their respective successors and permitted assigns.


 


SECTION 16.  Changes in Writing.  Neither this Guaranty nor any provision
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by each of the Guarantors and the Administrative Agent with the
consent of the Required Lenders.


 


SECTION 17.  Costs of Enforcement.  Each of the Guarantors agrees to pay all
costs and expenses including, without limitation, all court costs and
attorneys’ fees and expenses paid or incurred by the Administrative Agent or
any Lender or any Affiliate of any Lender in endeavoring to collect all or any
part of the Guaranteed Obligations from, or in prosecuting any action against,
any Borrower, the Guarantors or any other guarantor of all or any part of the
Guaranteed Obligations.


 

















 


SECTION 18.  CHOICE OF LAW.  THIS GUARANTY SHALL BE AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING WITHOUT LIMITATION, BUT OTHERWISE
WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS) OF THE STATE OF TEXAS BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.


 


SECTION 19.  CONSENT TO JURISDICTION.  EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF ANY UNITED STATES FEDERAL OR
TEXAS STATE COURT SITTING IN DALLAS, TEXAS, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS GUARANTY (OTHER THAN THOSE CONTAINING AN EXPRESS
CONSENT TO ANOTHER JURISDICTION) AND EACH GUARANTOR HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
ADMINISTRATIVE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY GUARANTOR
IN THE COURTS OF ANY OTHER JURISDICTION. 
ANY JUDICIAL PROCEEDING BY ANY GUARANTOR AGAINST THE ADMINISTRATIVE
AGENT OR ANY LENDER OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS GUARANTY SHALL BE BROUGHT ONLY IN A COURT IN
DALLAS, TEXAS.


 


SECTION 20.  WAIVER OF JURY TRIAL.  EACH GUARANTOR, THE ADMINISTRATIVE AGENT AND EACH
LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
GUARANTY OR THE RELATIONSHIP ESTABLISHED THEREUNDER.


 


SECTION 21.  Taxes. etc.  All payments required to be made by any of the Guarantors
hereunder shall be made without setoff or counterclaim and free and clear of
and without deduction or withholding for or on account of, any present or
future taxes, levies, imposts, duties or other charges of whatsoever nature
imposed by any government or any political or taxing authority thereof (but
excluding income and franchise taxes), provided, however, that if any of the
Guarantors is required by law to make such deduction or withholding, such
Guarantor shall forthwith  (i) pay to the
Administrative Agent or any Lender, as applicable, such additional amount as
results in the net amount received by the Administrative Agent or any Lender,
as applicable, equaling the full amount which would have been received by the
Administrative Agent or any Lender, as applicable, had no such deduction or
withholding been made, (ii) pay the full amount deducted to the relevant
authority in accordance with applicable law, and (iii) furnish to the
Administrative Agent or any Lender, as applicable, certified copies of official


 

















 


receipts evidencing payment of such withholding taxes
within 30 days after such payment is made.


 


SECTION 22.  Setoff.  Without limiting the rights of the Administrative Agent or the
Lenders under applicable law, if all or any part of the Guaranteed Obligations
is then due, whether pursuant to the occurrence of a Default or otherwise, then
the Guarantor authorizes the Administrative Agent and the Lenders to apply any
sums standing to the credit of the Guarantor with the Administrative Agent or
any Lender or any Lending Installation of the Administrative Agent or any
Lender toward the payment of the Guaranteed Obligations.


 


SECTION 23.  Collateral Agency Agreement.  The rights and remedies that the
Administrative Agent and the Lenders may have under this Guaranty shall be
subject to the terms and conditions of the Collateral Agency Agreement.


 


THIS WRITTEN GUARANTY AND
THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.


 

















 


IN WITNESS WHEREOF, each
of the Guarantors has caused this Guaranty to be duly executed, under seal, by
its authorized officer as of the day and year first above written


 


	
   

  	
  GUARANTOR:

  
	
   

  	
  [

  	
   

  	
  ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					



 


 


	
   

  	
  [

  	
   

  	
  ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					



 


 


	
   

  	
  [

  	
   

  	
  ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					



 

















 


EXHIBIT J


 


FORM OF JOINDER AGREEMENT


 

















 


JOINDER AGREEMENT


 


This JOINDER
AGREEMENT, dated
[           ] (this “Joinder
Agreement”) is delivered pursuant to that certain Senior Term Credit
Agreement, dated as of May 21, 2004 (as it may be amended, supplemented or
otherwise modified, the “Credit Agreement”; the terms defined
therein and not otherwise defined herein being used herein as therein defined),
by and among Clayton Williams Energy, Inc., a Delaware corporation, CWEI-SWR,
Inc., a Delaware corporation, CWEI Acquisitions, Inc., a Delaware corporation,
Warrior Gas Co., a Texas corporation, Romere Pass Acquisition L.L.C., a
Delaware limited liability company, CWEI Romere Pass Acquisition Corp., a
Delaware corporation, the Lenders, Bank One, NA, having its principal office in
Chicago, Illinois, as Administrative Agent, Union Bank of California, N.A., as
Syndication Agent and Bank of Scotland, as Co-Agent.


 


Section 1.              Pursuant to Section 7.27 of the
Credit Agreement, the undersigned hereby:


 


(a)           agrees that this Joinder Agreement
may be attached to the Credit Agreement and the Collateral Agency Agreement (as
defined in the Credit Agreement) and that by the execution and delivery hereof,
the undersigned becomes a [Borrower or Guarantor] under the Credit
Agreement and the Collateral Agency Agreement and agrees to be bound by all of
the terms thereof;


 


(b)           represents and warrants that each of
the representations and warranties set forth in the Credit Agreement and each
other Loan Document and applicable to the undersigned is true and correct both
before and after giving effect to this Joinder Agreement, except to the extent
that any such representation and warranty relates solely to any earlier date,
in which case such representation and warranty is true and correct as of such
earlier date;


 


(c)           that no event has occurred or is
continuing as of the date hereof, or will result from the transactions
contemplated hereby on the date hereof, that would constitute a Default or
Unmatured Default;


 


(d)           agrees to irrevocably and
unconditionally [guaranty the due and punctual payment in full of] [pay in full]
all Obligations when the same shall become due, whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise (including
amounts that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)) and
in accordance with the Credit Agreement; and


 


(e)           (i) agrees that the undersigned
will comply with all the terms and conditions of the Credit Agreement as if it
were an original signatory thereto and (ii) delivers to the Administrative
Agent supplements to all schedules attached to the Credit Agreement.


 


Section 2.              The undersigned agrees from time to time,
upon request of the Administrative Agent, to take such additional actions and
to execute and deliver such additional documents and instruments as the
Administrative Agent may request to effect the transactions contemplated by,
and to carry out the intent of, this Joinder Agreement.  Neither this Joinder Agreement nor any term
hereof may be changed, waived, discharged or terminated, except by an


 


21

















 


instrument in writing
signed by the party (including, if applicable, any party required to evidence
its consent to or acceptance of this Joinder Agreement) against whom
enforcement of such change, waiver, discharge or termination is sought.  Any notice or other communication herein
required or permitted to be given shall be given pursuant to Section 14.1 of
the Credit Agreement.  In case any
provision in or obligation under this Joinder Agreement shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or impaired
thereby.


 


THIS JOINDER AGREEMENT
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, BUT OTHERWISE WITHOUT REGARD
TO THE CONFLICT OF LAW PROVISIONS) OF THE STATE OF TEXAS, BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.


 


[Remainder of page intentionally left blank]


 


22

















 


IN WITNESS WHEREOF, the undersigned has
caused this Joinder Agreement to be duly executed and delivered by its duly
authorized officer as of the date above first written.


 


	
   

  	
  [

  	
   

  	
  ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  [

  	
   

  	
  ]

  
	
   

  	
  Title:

  	
  [

  	
   

  	
  ]

  
										



 


Address for Notices:


 


 


 


Attention:

Telecopier


 


with a copy to:


 


 


 


Attention:

Telecopier


 


ACKNOWLEDGED AND ACCEPTED,

as of the date above first written:


 


	
  BANK
  ONE, NA

  
	
  as Administrative Agent

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  



 


23

















 


SCHEDULE 1.1(a)


 


EXISTING LETTERS OF
CREDIT


 


Irrevocable
Standby Letter of Credit No. 3065235384, dated January 8, 2004, issued by Union
Bank of California, N.A. for the benefit of Oneok Energy Marketing and Trading
Company in the amount of $40,000.


 

















 


SCHEDULE 1.1(b)


 


SWR RATE MANAGEMENT
TRANSACTIONS


 


ISDA Master
Agreement dated September 15, 2003, by and between Macquarie Americas Corp. and
Southwest Royalties, Inc.


 


Energy Option
Transaction between Southwest Royalties, Inc. and Macquarie Americas Corp.,
Deal Reference No. HH 0501701/2, trade date – September 16, 2003.


 


Energy Option
Transaction between Southwest Royalties, Inc. and Macquarie Americas Corp.,
Deal Reference No. HH 0501703/4, trade date – September 16, 2003


 

















 


SCHEDULE 1.1(c)


 


SWR
INTEREST RATE AGREEMENTS


 


ISDA Master
Agreement dated as of August 22, 2003 between Union Bank of California, N.A. and
Southwest Royalties, Inc.


 


First
Amendment to ISDA Master Agreement dated as of February 17, 2004 between Union
Bank of California, N.A. and Southwest Royalties.


 


Five Swap
Transaction Confirmations between Union Bank of California, N.A. and the
Company:


 


	
  •

  	
   

  	
  For the
  period November 1, 2003 through November 1, 2004, principal - $65 million
  rate 1.680%

  
	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  For the
  period November 1, 2004 through November 1, 2005, principal - $60 million,
  rate 2.970%

  
	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  For the
  period November 1, 2005 through November 1, 2006, principal - $55 million,
  rate 4.290%

  
	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  For the
  period November 1, 2006 through November 1, 2007, principal - $60 million,
  rate 5.190%

  
	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  For the
  period November 1, 2007 through November 1, 2008, principal - $45 million,
  rate 5.730%

  



 

















 


SCHEDULE 1.1(d)


 


PERMITTED LIENS


 


None.


 

















 


SCHEDULE 5.8


 


SUBSIDIARIES AND OTHER
INVESTMENTS

(See Sections 0 and 0)




	
  SUBSIDIARY

  	
   

  	
  JURISDICTION

  	
   

  	
  OWNED BY

  	
   

  	
  PERCENT

  OWNERSHIP

  
	
  Warrior Gas
  Company

  	
   

  	
  Texas

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100%

  
	
  Clajon Industrial
  Gas, Inc.

  	
   

  	
  Texas

  	
   

  	
  Warrior Gas
  Company

  	
   

  	
  100%

  
	
  Clayton
  Williams Trading Company

  	
   

  	
  Texas

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100%

  
	
  Clayton
  Williams Venezuela, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100%

  
	
  CWEI
  Acquisitions, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Clayton Williams
  Energy, Inc.

  	
   

  	
  100%

  
	
  Clayton
  Williams Pipeline, Inc.

  	
   

  	
  Texas

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100%

  
	
  CWEI Romere
  Pass Acquisitions Corp.

  	
   

  	
  Delaware

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100%

  
	
  Romere Pass
  Acquisition, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  CWEI Romere
  Pass Acquisitions Corp.

  	
   

  	
  100%

  
	
  Warrior
  Mississippi Corp.

  	
   

  	
  Delaware

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100%

  
	
  Southwest
  Royalties, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100%

  
	
  Blue Heel
  Company

  	
   

  	
  Delaware

  	
   

  	
  Southwest
  Royalties, Inc.

  	
   

  	
  100%

  
	
  Southwest
  Consolidated Partnerships, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Southwest
  Royalties, Inc.

  	
   

  	
  100%

  
	
  Southwest
  Managed Assets, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Southwest
  Royalties, Inc.

  	
   

  	
  100%

  
	
  SWR Property
  Company

  	
   

  	
  Delaware

  	
   

  	
  Southwest
  Royalties, Inc.

  	
   

  	
  100%

  
	
  Tex-Hal
  Partners, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100%

  



 

















 


SCHEDULE 5.13


 


OWNERSHIP OF PROPERTIES


 


None.


 

















 


SCHEDULE 7.11


 


INDEBTEDNESS


 


None.


 

















 


SCHEDULE 7.15(vi)


 


RELATED
PARTNERSHIPS


 


	
  INVESTMENT IN

  	
   

  	
  FORMATION

  	
   

  	
  GENERAL

  PARTNER %

  	
   

  	
  LIMITED

  PARTNER % (a)

  	
   

  
	
  Southwest Royalties, Inc. Income Fund V,
  L.P.

  	
   

  	
  Tennessee

  	
   

  	
  10.00

  	
  %

  	
  34.99

  	
  %

  
	
  Southwest Royalites, Inc. Income Fund VI,
  L.P.

  	
   

  	
  Tennessee

  	
   

  	
  10.00

  	
  %

  	
  32.09

  	
  %

  
	
  Southwest Oil & Gas Income Fund VII-A,
  L.P.

  	
   

  	
  Delaware

  	
   

  	
  10.00

  	
  %

  	
  28.24

  	
  %

  
	
  Southwest Royalties Institutional Income
  Fund VII-B, L.P.

  	
   

  	
  Delaware

  	
   

  	
  10.00

  	
  %

  	
  26.78

  	
  %

  
	
  Southwest Oil & Gas Income Fund VIII-A,
  L.P.

  	
   

  	
  Delaware

  	
   

  	
  10.00

  	
  %

  	
  22.95

  	
  %

  
	
  Southwest Royalties Institutional Income
  Fund VIII-B, L.P.

  	
   

  	
  Delaware

  	
   

  	
  10.00

  	
  %

  	
  19.83

  	
  %

  
	
  Southwest Oil & Gas Income Fund IX-A,
  L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  4.34

  	
  %

  
	
  Southwest Royalties Institutional Income
  Fund IX-B, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  3.86

  	
  %

  
	
  Southwest Oil & Gas Income Fund X-A,
  L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  1.80

  	
  %

  
	
  Southwest Royalties Institutional Income
  Fund X-A, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  3.13

  	
  %

  
	
  Southwest Oil & Gas Income Fund X-B,
  L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  2.39

  	
  %

  
	
  Southwest Royalties Institutional Income
  Fund X-B, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  8.89

  	
  %

  
	
  Southwest Oil & Gas Income Fund X-C,
  L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  3.42

  	
  %

  
	
  Southwest Royalties Institutional Income
  Fund X-C, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  3.20

  	
  %

  
	
  Southwest Developmental Drilling Fund 91-A,
  L.P.

  	
   

  	
  Delaware

  	
   

  	
  11.00

  	
  %

  	
  5.60

  	
  %

  
	
  Southwest Developmental Drilling Fund 92-A,
  L.P.

  	
   

  	
  Delaware

  	
   

  	
  11.00

  	
  %

  	
  0.95

  	
  %

  
	
  Southwest Partners, L.P.

  	
   

  	
  Delaware

  	
   

  	
  15.00

  	
  %

  	
  4.40

  	
  %

  
	
  Southwest Combination Income/Drilling
  Program 1988, L.P.

  	
   

  	
  Delaware

  	
   

  	
  14.00

  	
  %

  	
  3.92

  	
  %

  
	
  Southwest Developmental Drilling Fund 1990,
  L.P.

  	
   

  	
  Delaware

  	
   

  	
  15.00

  	
  %

  	
  2.45

  	
  %

  
	
  Southwest Developmental Drilling Fund 1993,
  L.P.

  	
   

  	
  Delaware

  	
   

  	
  11.00

  	
  %

  	
  0.13

  	
  %

  
	
  Southwest Developmental Drilling Fund 1994,
  L.P.

  	
   

  	
  Delaware

  	
   

  	
  11.00

  	
  %

  	
  0.00

  	
  %

  
	
  H.H. Wommack Income Fund 1983-I, L.P.

  	
   

  	
  Tennessee

  	
   

  	
  9.00

  	
  %

  	
  15.15

  	
  %

  
	
  Southwest Royalties, Inc. Income Fund
  1983-I, L.P.

  	
   

  	
  Tennessee

  	
   

  	
  9.00

  	
  %

  	
  25.94

  	
  %

  
	
  Southwest Royalties, Inc. Income Fund
  1984-I, L.P.

  	
   

  	
  Tennessee

  	
   

  	
  9.00

  	
  %

  	
  22.20

  	
  %

  
	
  Southwest Combination Income/Drilling
  Program 1987-I, L.P.

  	
   

  	
  Delaware

  	
   

  	
  14.00

  	
  %

  	
  3.60

  	
  %

  
	
  Southwest Royalties, Inc. Income Fund
  1985-I, L.P.

  	
   

  	
  Tennessee

  	
   

  	
  9.00

  	
  %

  	
  9.20

  	
  %

  
	
  Southwest Oil & Gas Income Fund XI-A,
  L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  1.28

  	
  %

  
	
  Southwest Royalties, Inc. Institutional
  Income Fund XI-A, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  8.37

  	
  %

  
	
  Southwest Royalties, Inc. Institutional
  Income Fund XI-B, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  0.37

  	
  %

  



 












(a) 
LP interest shown is SWR’s share of total partnership capital held
through its ownership of limited partnership units.


 

















 


SCHEDULE 7.24


 


TITLE CURATIVE
REQUIREMENTS


 


1.              Clayton
Williams/Driscoll-Duwell Unit No. 1

Duval County, Texas


 


Comments:            Title
Materials credit working interest in unit Lease No. 1 to Clayton Williams
Energy, Inc., Winn Exploration Co., Inc. and LMP Petroleum, Inc. and in unit
Lease No. 2 to Clayton Williams Energy, Inc. and Winn Exploration Co.,
Inc.  Clayton Williams Energy, Inc.
claims 100% of the unit working interest.


 


Requirement:         Furnish
copies of recorded assignments of unit working interest of Winn Exploration
Co., Inc. and LMP Petroleum, Inc. to Clayton Williams Energy, Inc.


 


2.              Cotropia
Gas Unit No. 1

Robertson County, Texas


 


Comments:            Requirements
below reference Division Order Title Opinion dated May 27, 2003 from Cox
& Smith, San Antonio, Texas, covering the Cotropia Gas Unit No. 1, 640.0
acres, G.A. Nixon Survey, A-31, Robertson County, Texas, certified to
January 31, 2003 at 5:00 p.m.


 


Requirement:         Furnish
materials in satisfaction of Requirement 22.


 


Requirement:         Furnish
materials in satisfaction of Requirement 27.


 


3.              Pabst
Unit

Robertson County, Texas


 


Comment:              Various
title opinions by Lanier Yeates and Jim Burgin & Associates credit UPR with
100% working interest in each unit tract. 
Clayton Williams Energy, Inc. claims 50% working interest.


 


Requirement:         Furnish
copy of recorded assignment from UPR to Clayton Williams Energy, Inc. covering
undivided 50% working interest in Pabst Unit tracts.


 


4.              Phillips
17 Lease & Phillips 19 Lease

Eddy County, New Mexico


 


Comment:              Requirement
references DOTO from Lynch, Chappell & Allsup (11/28/00).


 


Requirement:         Satisfy
Requirement B regarding recorded assignment from Phillips Petroleum Company to
Clayton Williams Energy, Inc.


 


5.              Broughton-Perrone
No. 1 Unit

Robertson County, Texas


 


Comment:              Requirement
references DOTO from Stubbeman, McRae (8/20/98).


 

















 


Requirement:         Satisfy
Requirement No. 33 regarding copy of recorded assignment from UPR to Clayton
Williams Energy, Inc.


 


6.              C.A.
Encalade #1, 0-6 RB SUA

Plaquemines Parish, Louisiana


 


Requirement:         Furnish
copy of final approved Unit Plat and copy of unit Division Order Title Opinion.